Real estate agents, accountants and lawyers are in the sights of a federal money laundering crackdown amid fears Australia will soon be globally “grey listed” for dragging its heels on financial crime.

Attorney-General Mark Dreyfus warned on Tuesday that Australia is years behind international standards for combating criminal syndicates like drug and human traffickers cleaning their cash.

He said legal loopholes allowing financial advisers to help criminals without sounding the alarm must be closed, or Australia will draw the wrath of  regulators fearing we’ve become a safe haven for fraud.

“Australia is falling short,” Dreyfus told the National Press Club.

“[We’re] at increased risk of becoming a haven for money laundering.”

Today we released two new national risk assessments taking an in-depth look at the terrorism financing and money laundering threats and vulnerabilities in Australia.
Read more: https://t.co/qRfqsI9mz3#amlctf #nationalriskassessment #fatf #moneylaundering #terrorismfinancing pic.twitter.com/XwgoeJsN2j

— AUSTRAC (@AUSTRAC) July 9, 2024

The warnings were echoed on Tuesday by analysis from money laundering regulator AUSTRAC, which said Australia has become an “attractive destination” for processing criminal proceeds.

Profits from drug deals, scams and even fraud of government services like the NDIS are at increased risk of being laundered in Australia, the damning report from the regulator revealed.

Jamie Ferrill, a leading expert on money laundering and senior lecturer at Charles Sturt University, agreed Australia risks falling foul of minimum global standards because regulations are too lax.

“We are not appropriately regulating these designated non-financial businesses,” Ferrill said.

‘Veils of secrecy’: Rise in money laundering 

Money laundering comes in many forms, but is essentially a process designed to convert the proceeds of criminal activities – ranging from drug sales to terrorism – to hide it from regulators.

We’ve all seen examples of it in movies, though Hollywood often fails to capture the cutting edge, which increasingly involves complex financial arrangements and tech like cryptocurrency.

In Australia, which in recent years has copped a poor performance review from global regulators on efforts to combat money laundering, the problem centres on so-called “tranche two” entities.

These are white-collar professionals such as real estate agents, lawyers and accountants who aren’t currently broadly regulated because they aren’t considered financial institutions like banks.

But as Ferrill explains, that doesn’t mean they don’t play a key role in enabling money laundering, with current laws not requiring them to report criminal activity to regulators, let alone identify it.

In one particularly extraordinary case spotlighted on Tuesday, an overseas family with members on an Interpol red list bought more than $750 million in property in Australia through an agent.

That included a property purchase worth $30 million that went undetected initially.

“These professionals have access to a world most people don’t,” Ferrill said.

“In the case of accountants; they know the different regulations for setting up trust accounts and can send money through veils of secrecy.”

In one case spotlighted on Tuesday by AUSTRAC chief Brendan Thomas at the NPC, a real estate agent in Australia processed a $30 million property sale.

“Lack of money laundering controls in non-financial businesses is creating a significant hole that many criminals are walking straight through,” Thomas warned.

“The money laundered in Australia is extensive.”

Crackdown looms 

Dreyfus said on Tuesday that the government will introduce new laws enhancing the regulatory net around white-collar industries, which he hopes will enter Parliament by the end of the year.

Ferrill explained the changes will expand Australia’s money laundering regime several times over to cover more than 100,000 entities, who will soon file things like suspicious transaction reports.

“It’s not always dirty money, but in many of these cases these questions need to be asked,” Ferrill said.

This alone won’t be enough to counter the growing threat of money laundering though, Ferrill warned, particularly as the increasingly complex global financial system makes crime easier.

AUSTRAC is also warning further action will be needed, spotlighting a growing risk that technology such as cryptocurrencies are being used for money laundering that’s hard to track.

“Regulation of digital currencies is currently limited to digital currency-to-fiat currency (and vice versa) transactions provided,” AUSTRAC said in its report.

“This means digital currency-to-digital currency payments, such as those made between criminal groups, are only visible to law enforcement and regulators with blockchain monitoring tools where the wallet address is known.”