The Pandora Papers: Alarm Bells Are Ringing Loud And Clear

Money Laundering

7 October 2021

By Serena Lillywhite, (Chief Executive Officer)

The Pandora Papers: Alarm Bells Are Ringing Loud And Clear

The Pandora Papers lays bare the need for much greater scrutiny of offshore corporate structures, and the flaws in Australia’s own corporate registry system and anti-money laundering regime, that has allowed Australia to become a hot destination for dirty money.

As Four Corners revealed the leaked documents show high-level officials, kleptocrats, and billionaires moving wealth offshore while concealing their identities, buying real estate and luxury goods – all with the help of corporate service providers and lax laws in Australia.

Australia has fallen well behind international standards and global trends to disclose beneficial owners. Despite commitments to do so at the 2014 G20 (High-Level Principles on Beneficial Ownership), the UK Anti-Corruption Summit in 2016, and in the Open Government Partnership National Action Plan – also in 2016, this has come to nothing. The last consultation process was held four years ago in 2017.

And the problems run much deeper. Australia’s corporate regulatory system is not up to scratch. This means it is far too easy for people who may have been involved in corruption and other illegal activities to register companies, and their nominee directors, in Australia. They can register without providing proof of identity, 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, both in Australia and internationally.

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.

Having a company registered in Australia provides an air of legitimacy, but this is not always the case. In reality, it’s hard to know where real control is coming from and what links there may be to illicit financial flows – because the questions are just not asked.

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 enablers – the lawyers, accountants, and real estate agents – to ask questions as to the source of the money and to report suspicious transactions to the regulator. Large sums of illicit funds can therefore be concealed and integrated into the legitimate economy through the real estate sector.

The Financial Action Task Force – which ironically Australia was a founding member of – has been urging Australia to strengthen its anti-money laundering laws for fifteen years. While there have been some amendments, the lack of coverage of the enablers leaves a gaping hole, and all Australians impacted by a distorted real estate sector. Australia is just one in five countries (out of 177) that has failed to meet its international commitment to strengthen anti-money laundering laws.

Australia not only needs to work towards complying with international standards, but requires a complete mentality shift to prioritise keeping out criminally derived monies from the economy. Unless this occurs, Australia will continue to be exposed. It seems like our reputation is growing for all the wrong reasons.

Photo: Tom-Rumble on Unsplash