Stopping dirty money in Australia and Cambodia: Combatting money laundering into Australia’s real estate sector through partnership

By Transparency International Australia, KordaMentha

  Globally, money laundering (ML) is a major driver of poverty and inequality. It erodes public trust, democracy and leads to less government revenue for essential services including health, education, and infrastructure. It also creates economic instability and social harms while enabling criminals to take advantage of legitimate actors in the private sector, hurting organisations and the community in the long term. In this report, Transparency International Australia (TIA) in partnership with KordaMentha, consider the ML vulnerabilities that exist in Cambodia and Australia and the gaps in the relevant Anti-Money Laundering (AML) regimes that make Australia an ideal destination for regional foreign proceeds and illicit funds. The timing of this report coincides with Australia’s consultation on the ‘Tranche 2’ reforms, the proposed amendments that would extend obligations under the AML/CTF legislation to real estate agents, lawyers, accountants, trust and company service providers and dealers in precious metals and stones.1 Our research suggests that Cambodia’s cash economy, geographical position, perceived corruption, porous borders, and gaps in the effectiveness of its AML legislative regime are all factors leading to increased ML vulnerabilities. The effectiveness of Cambodia’s AML regime is limited by a largely cash-based and partially dollarised economy that is growing on the back of industries that are vulnerable from a ML perspective such as casinos, garment manufacturing and logging. 2 The Cambodian AML regulators have limited capacity to oversee the regulated population, particularly in relation to the fast-growing financial and banking industries that are responsible for remitting funds domestically and internationally. A deeply politicised judicial system and reports of heightened corruption also constrain effective enforcement. Sources of funds laundered in Cambodia are widespread, most notably because of the prevalence of crimes such as human trafficking and exploitation, drug trafficking, smuggling, fraud and corruption – all of which are predicate ML offences. Cambodia is also seen as a regional ML hub for Chinese, Myanmar and Thai interests who invest funds in both legitimate and illegal industry in Cambodia, including in the casino industry, where rapid expansion prior to the COVID-19 pandemic is believed to have allowed ML to proliferate. Our research shows that ‘dirty money’ flowing across transnational borders, including from Cambodia, tends to move out of poorer countries and into the economies of wealthier nations, including Australia and the United States. Australia’s current Anti-Money Laundering and Counter Terrorism Financing (AML/CTF) legislative framework, and in particular its failure to implement ‘Tranche 2’ reforms and effectively regulate Designated NonFinancial Businesses and Professions (DNFBPs) makes Australia an attractive destination for such funds moving illegally out of the Southeast Asian Region. In general terms, the current Australian legislative regime does not sufficiently deter criminals from laundering money through Australia’s real estate and the broader economy. Australia has visibility of the flow of funds from foreign jurisdictions. Current reporting entities (REs) are required under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 Act (AML/CTF Act), to report all international transfers to the regulator, the Australian Transaction Reports and Analysis Centre (AUSTRAC). Furthermore, AUSTRAC collects declarations of all monetary instruments valued over $10,000. Together these two channels in this report are referred to as the ‘regulated channels’, and the figures below are the indicative value of fund flows in 2022  This report explores the significant amount of funds flowing through these ‘regulated channels’ as well as emerging typologies conducted through entities not currently captured under the AML/CTF regime (‘unregulated channels’). In particular we explore the investment Cambodian foreign persons have made into Australia’s property market. The limited dataset sourced for this report shows that between 2019 and 2023, 118 properties were settled by Cambodian foreign persons, worth a combined value of $110 million. This report concludes that greater partnerships are required between Cambodian and Australian law enforcement and regulatory bodies, as well as the strengthening of both regulatory regimes to mitigate the flow of illegal funds from Cambodia to Australia and minimise harms to both Cambodian and Australian communities. 

Law , VIC: Transparency International Australia; Melbourne, AUS: 

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