This is part 12 in a series. For the full series, go here.
A couple of months ago, the world awoke to yet another revelation of another massive, global dirty money scandal. The Pandora Papers revealed the secret offshore bank accounts of current and former heads of state, public officials, billionaires, celebrities and business leaders totalling an estimated US$32 trillion.
Hidden offshore bank accounts don’t just enable tax evasion; they also assist people to hide ownership interests and facilitate money laundering.
Australia was again named as a major source and destination of potentially dirty money.
The scandal laid bare the need for much greater scrutiny of offshore corporate structures, and the flaws in Australia’s corporate registry system and anti-money laundering legislation.
Last month Transparency International Australia gave the Senate inquiry on money laundering nine publicly reported examples of foreign nationals purchasing lavish property portfolios across Australia with what looks like the proceeds of crime and corruption.
The problem is that it is too easy for companies and their associated entities — often with opaque business structures — to be registered in Australia. This enables companies to use Australia as a launching pad for dubious activities, including money laundering. They can simply register a company director’s name, even Homer Simpson, without adequate due diligence checks, beneficial ownership disclosure, identification of potential links to politically exposed persons or a robust assessment of their business activities and legitimacy, in Australia and internationally.
The challenge is knowing who really sits behind the wheel, who is the ultimate beneficiary of a company. Australia’s inability to identify the true owners of companies means that transactions are processed and deals are done without proper due diligence checks, and without knowing the ultimate source or destination of the money — and if it’s linked to criminal gangs and corrupt kleptocrats.
Many countries have a public register of beneficial owners, but not Australia. For years Australia has lagged, and until recently you needed more ID to get a library card than to register a company.
Some modest improvements have recently been made with the Australian Securities and Investment Commission (ASIC) introducing a director identification number. Company directors will need to verify their identity. Existing directors have until November 30, 2022, to apply. New directors appointed between November 1, 2021, and April 4, 2022, must apply within 28 days of their appointment, and from April 5, 2022, intending directors must apply before being appointed.
These are welcome baby steps. However, Australia remains highly exposed to money laundering and dodgy company registration, as there is still no requirement for nominee directors to disclose who they are acting for, and we do not have a public register of beneficial owners. This shrouds the real owner and beneficiary.
Once a company is registered in Australia, it can be used as a secret vehicle to purchase real estate and land without the public or regulators having any idea who is the ultimate beneficiary.
Transparency around who owns and benefits from companies is critical to protect the integrity of financial systems, tackle tax evasion and money laundering, and prevent the misuse of corporate structures for corruption and criminal activity.
Australia’s property market has become a destination of choice for those wanting to launder dirty money or simply stash their cash. Our weak anti-money laundering laws mean there is no requirement for the gatekeepers — the lawyers, accountants and real estate agents — to ask questions about the source of the money and to report suspicious transactions to the regulator. Large sums of illicit funds can be concealed and integrated into the legitimate economy through the real estate sector.
Australia needs an open register of beneficial owners to help shine a light on where the money comes from, goes to, and who benefits. This would make it a lot harder for criminals to prosper, or public individuals and contractors to hide questionable conduct.
Australia also needs to take seriously the recommendations of the Financial Action Task Force (a global body Australia helped establish) which has been urging Australia to strengthen its anti-money laundering laws for 15 years. Australia is just one of five countries (out of 177) that has failed to meet its international commitment to strengthen anti-money laundering laws.
This matters because it needs to stop criminals prospering through the financial system, it needs to stop dirty money distorting the housing market — which has reached crisis point — and because people need to have faith that the system works.
Australia can’t have special loopholes for criminals to exploit, and can’t make it so easy for corrupt leaders and business moguls to siphon away funds stolen from the community into offshore bank accounts, or splurge on McMansions and superyachts.
Transparency allows us to follow the money. A public register of beneficial ownership is long overdue.
Here here! It has long amazed me how people haven’t connected the dire state of the housing market with foreign money.
Why are pre-existing directors given until November 2022 to confirm their identities.
Surely it can happen quicker than that?
Then there is the behemoth of all laundering of funds!
One of Australia’s biggest “for profit” Healthcare providers borrowed $1,500,000,000 from a bank based in Laos, an impoverished Asian communist country, the only other Australian company with extensive borrowings is the Adani/ Bravus.
These funds were borrowed by the healthcare company to expand its hold on more hospitals, build enormous extensions on the ones that have a public/ private partnerships and expand into the UK and France.
When the Conservatives are in power a minimum of 25% of the entire NHS budget is spent in their hospitals and during the labour governments, less than 10%.
I will leave it to your imagination as to how much this company received in JobKeeper and supplements to keep its staff on and its beds ready. for the first and second wave of Covid.
I will also say that the bank from Laos currently is in the position whereby it can end up owning the entire Adani operation in central Queensland and there will be nothing the governments (state or federal) will be able to do about it.
This will have effectively gone around the Foreign Investment review Board and the Adani family will be out with all their money and a profit.
“How good is Australia”.
ASIC hardly helps when company details search e.g. who are the owners, directors etc. are fee based; some years ago it was free.
According to MWM this can be used to hinder investigative media when a trail of linked companies are being used, hence, requires multiple searches and payments to find the substantive ownership; not unlike offshore company arrangements via the City of London to mask ownership.
I think that you can search most if not all of the NZ govt companies database for free. It should be the same here but ASIC generates a profit for the government by enforcing the good old “private good, public bad” idiotology. They require that you (a) have to pay not insubstantial amounts for the various company and individual searches available and (b) you have to use a private “middle man” for the search. It is just another ideologically driven rort. In the interests of transparency, protection from “phoenixing” crooks and equitable access to public data, ASIC’s registers should be available free of charge to all.
Anyone tried to do a simple transfer of deceased to surviving spouse lately in either Vic or NSW?
It used to take half an hour and a fee of $25.
No longer.
Both state in the last couple of years privatised their Land Titles which explains which vacant properties are suddenly changing hands and being developed by the most rapacious industry of all – the only group to be banned from from making political donations in NSW.,
This hardly earth shattering news.
I worked in a western Queensland town, in the middle of cattle property 30 years ago.
A few of my cousins are 3rd and 4th generation graziers, stretching from the New England tableland to FNQ cattle fattening properties.
One of my cousins took the time to point out which of the big properties had been bought up during the droughts by Australian registered Chinese owned companies, having been sold up by Elders.
Then came the feed lots, the trucking firms, the grain growing properties and finally the Tully Sugar Mill.
A completely vertically integrated beef production line, which ended with the cattle walked onto ships out of the ports of Townsville and Brisbane.
No tax, nothing except some wages and few other costs and perfectly legal.
Fix this if you can and understand why the Chinese don’t raise a sweat when they say they are cutting their purchase of meat from Australia.
Similarly with the purchase of Tasmania’s largest dairy producer a couple of years ago.
There was some resistance locally and the FIRB ‘looked into it’ as through a mirror, darkly.
Does anyone recall the outcome?
Vertical integration is not just a problem with foreign ownership – domestically it never benefits the populace.
The biggest problem is that the Chinese don’t understand the concept of quality control and so they don’t value quality control.
Thus after purchasing one of Australia’s most reputable dairy company’s they choose to maximize their profit by doing away with quality control and the slow slide into a crap product commences.They have already done this in New Zealand.
Speaking of crap, the other thing the Chinese do not value is clean water and so they have no problems pumping cow poo directly into waterways, which is also the same thing as the did in New Zealand.
After trading on the company reputation until it is destroyed, they move on.