Real Estate, professional services, open doors for financial crime

Australia’s poor position in a global review of shell companies is due to the country’s failure to put in place proper anti-money laundering laws, warns Moody’s Analytics.

Australia’s lax policies around professional services and real estate are the driving force that have led the country to rank second worst in the Asia Pacific for red flags in a shell company review by Moody’s Analytics.

A recent survey of Australia’s business registry raised 708,640 warning flags against companies over key features which could indicate financial crime.

Moody’s Analytics head of Financial Crime APAC and the Middle East Choon Hong Chua said even he was shocked at how many red flags were raised in the review of Australia’s corporate landscape.

Mr Chua said Australia was “really on our radar” as it was one of three countries globally with no anti-money laundering coverage of the professional services and real estate sectors.

This sees know-your-customer requirements, which are already in place in the financial sector, not extended to cover real estate agents, lawyers, and accountants dealing with new clients.

Assets seized by the Australian Federal Police. Picture: Supplied

Moody’s review flagged hundreds of thousands of Australian companies for being linked to corporate behaviour associated with shell company activity, a key risk of financial crime and money laundering.

Mr Chua said Australia was an incredibly easy to set up a company and had many professional services firms who could help establish an operation which could be used to launder money or buy property with little to no questions asked about the source of funds.

He pointed to the recent case of the Chang Jiang Money exchange, which police allege was at the centre of a web of money laundering used to purchase properties across Australia.

Mr Chua said it was clear these companies had used professional services to establish the web.

“We don’t know who set up these companies,” he said.

“If you had legal or corporate services going unchecked, anyone can set up a company running anything they like.”

“That opens an unfortunate challenge, the onus (to detect crime) becomes on the financial institutions, all the banks have to do the job.”

Mr Chua said a key feature of the companies flagged by Moody’s Analytics was that many had directors who were from outside Australia.

“All these nominee directors and some of the people behind these shell companies, a large percentage are not Australians,” he said.

“You have a lot of nationalities coming in and setting up.”

Mr Chua said Australia presented similarly to the UK as a hotspot for shell companies and potential financial crime.

Moody’s data flagged 769 Australian companies for boasting directors with “outlier ages”, who either are improbably young or extremely old to be running a business.

The review also found 12,177 companies had mass registration issues for sharing names, addresses or directors in what may “suggest systematic efforts to obfuscate ownership”.

Mr Chua said the review also identified a number of houses and otherwise unremarkable buildings which had been used to register thousands of corporate entities.

He said this was sometimes used when people registered shell companies to be later sold or used in financial crime.

Many of these companies are themselves registered as a professional service business or in the wholesale trade, in a bid to allow them to send and receive large sums of money from overseas with little questioning.

“As of now, this particular risk is the biggest and most glaring,” Mr Chua said.

“In the past, it was casinos and the gaming industry.”