Australia must scrap the loopholes in our financial systems so we can expose where the dirty money comes from, goes to and who benefits.
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 yearsAustralia 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 andInvestment 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 TaskForce (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 super yachts.
Transparency allows us to follow the money. A public register of beneficial ownership is long overdue.