AUSTRAC has released two new reports which identify money laundering methods which use real estate agents and lawyers.

Real estate agents are not subject to the provisions of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). However, real estate transactions usually go through a financial institution – for example, as loans, deposits or withdrawals.

Criminals use loans or mortgages to layer and integrate illicit funds into high-value assets such as real estate. Loans or mortgages are essentially taken out as a cover for laundering criminal proceeds. Lump sum cash repayments or smaller ‘structured’ cash amounts are used to repay loans or mortgages. This allows illicit funds to be commingled with legitimate funds.

Methods include:

• Use of third parties
• Use of loans and mortgages
• Manipulation of property values
• Structuring of cash deposits to buy real estate
• Rental income to legitimise illicit funds
• Purchase of real estate to facilitate other criminal activity
• Renovations and improvements to property
• Use of front companies, shell companies, trust and company structures
• Use of professional facilitators or ‘gatekeepers’
• Overseas-based criminals investing in Australian real estate.

Money laundering methods using lawyers include establishing trusts and other structures to hide identity, recovering fictitious debts and making payments through lawyer’s trust accounts.

Under section 15A of the Financial Transaction Reports Act, solicitors have obligations to provide significant cash transaction reports to AUSTRAC. This reporting obligation is triggered if a there is a cash transaction involving the transfer of currency equivalent to AUD10,000 or more.

Legal practitioners are generally not subject to the obligations set out in the AML/CTF Act, although they may have obligations if they offer any of the ‘designated services’ covered by the Act.

The reports give examples of indicators which could justify monitoring including:

• using cash to settle transactions which are not usually cash-based, such as real estate purchase
• Cash is used to make a significant deposit for the purchase of a property and the balance is financed by an unusual source – for example, a third party, private lender or offshore bank
• Complex transactions in which multiple properties are bought, re-sold or exchanged
• multiple and unexplained funds transfers, especially from overseas
• difficulty identifying the ultimate source of deposits
• moving funds to/from bank secrecy jurisdictions or high-risk jurisdictions.