Australian financial intelligence officials last year investigated more than $3.3 billion of suspect transfers by Chinese investors — including $1bn invested in property — raising concerns that Australia’s foreign ownership laws are being sidestepped by people desperate to get their money out of China.
A total $3.36bn of suspicious financial transactions were reported in 2015-16 to Austrac, the funds-tracking agency, by banks, money remitters and other financial institutions, all related to funds flowing to and from China.
The figures lay bare the scale of Chinese investment in the Australian property market as well as the concerns of officials in Beijing and Australia about investors rorting foreign ownership regulations.
The next top 10 sources of suspicious financial activity after China did not total $3bn.
With housing affordability set to be one of the hottest political issues this year, the extent of the transfers is likely to increase pressure on politicians and regulators to launch a crackdown.
Incoming NSW Premier Gladys Berejiklian nominated housing affordability as a top priority of her government, saying it consistently was rated the issue of biggest concern to voters.
Scott Morrison last week travelled to Britain solely to investigate potential policy responses to the ever-spiralling cost of Australian housing.
There has long been heated debate on the role played by foreign buyers in driving up property prices in Australia’s major cities. According to the most recent ANZ-Property Council survey, foreign buyers accounted for 21 per cent of all residential purchases nationally. In Victoria, foreigners accounted for 25 per cent of all sales, and 24 per cent in NSW.
This trend loosely aligns with Austrac’s own reporting, which found that the most property-related fund transfers from China reported to the agency were linked to Victoria, followed by NSW.
Australia has imposed strict rules on foreign ownership of residential property, with foreign buyers prohibited from buying existing dwellings. They can buy only new homes and units.
China, too, has imposed tough rules, with its citizens able to transfer a maximum of $US50,000 ($66,185) out of the country in a year.
But sources say rorting is rife, with foreign buyers using a variety of scams to get their money out of China.
At their most basic, the scams involve using a network of friends and family members to transfer multiples of $US50,000 into Australia, where it is collected and used by a trusted agent to buy property.
More sophisticated scams involve buying homes through a web of incorporated companies or through Chinese permanent residents. Neither entity is restricted by conditions on property purchases.
Andrew Su, director of Compass Global Markets, a foreign exchange company, said China’s middle classes were looking increasingly to hedge their risks in response to rising domestic uncertainty. “There is a widespread belief that the renminbi will devalue significantly in the next couple of years,” Mr Su told The Australian. “A lot of people believe it will depreciate about 30 per cent over the next few years.’’
The high level of state corruption in China, Mr Su said, also prompted Chinese citizens to get their money offshore where it could not be seized by government officials.
“It was a little bit like the Wild West,’’ Mr Su said, referring to China’s booming economy. “Money was made very quickly.’’
AMP chief economist Shane Oliver agreed foreign buyers were a factor in driving up prices, particularly in Sydney and Melbourne. But overall, he said, the largest driver was a lack of supply in the Sydney basin.
However, he said, in those parts of Sydney with large Chinese communities, such as Chatswood and Epping in Sydney’s north, the number of foreign buyers piling into the market undoubtedly was affecting prices.
“There would be some trickledown effect because it would be displacing some buyers,’’ Mr Oliver said. “There’s no doubt it’s having an impact. Is it the main driver? I don’t think so. The main driver is a lack of supply for many years and low interest rates.’’
Under Austrac’s strict anti-money laundering and counter-terrorism laws, financial institutions are obliged to report any dubious transactions.
These so-called “suspicious matter reports” are not definitive evidence of wrongdoing, but rather indications wrongdoing may have occurred.
Austrac chief executive Paul Jevtovic said both Chinese and Australian authorities were committed to cracking down on fraudulent transactions. A memorandum of understanding signed late last year by both counties was evidence of this.
“Austrac is constantly vigilant to identifying increases in the number of suspicious transactions from various counties, including China,” Mr Jevtovic told The Australian. “We’re confident that our approach with our Chinese counterparts, as well as Australian law enforcement and other partners, such as the ATO, ASIC and FIRB, is providing an effective response to protect the Australian community from such crime.”
This article was originally published by PAUL MALEY on the 30th Jan 2017 via theaustralian.com.au