by Christopher Knaus and Nick Evershed
The Guardian

17 Sep 2024

Convicted criminals and unlicensed agents are operating in the real estate sector across multiple states, a Guardian Australia investigation has found.

In New South Wales, the Guardian has established that two individuals convicted of dishonesty offences have been allowed back into the industry well within the usual 10-year prohibition, and that gaps in the law mean convicted money launderers are able to find their way back into the industry.

In NSW, Victoria, Western Australia and Queensland, authorities have together fielded hundreds of complaints about real estate agents operating unlicensed and a Guardian analysis of property ads suggests dozens are selling or leasing property without being listed on Victoria’s public register.

The revelations come as the federal government pushes to subject the real estate sector to additional scrutiny through its second tranche of counter-terrorism financing and money-laundering laws. The legislation, introduced to parliament last week, is designed to force the real estate sector to take steps to prevent money laundering and bring Australia in line with other developed nations.

Why real estate attracts criminals

Australian federal police say the Australian property market, given its value growth and liquidity, has become an “attractive destination for criminals to both store value and enjoy the fruits of their illicit activities”.

The AFP told the Guardian criminal groups were using real estate agents to give crime proceeds an “appearance of legitimacy” through asset purchases.

AFP data shows real estate is by far the biggest asset type seized by its criminal assets confiscation taskforce. The AFP restrained about 78 properties worth $106.6m in 2021-22, with an average property value of $1.36m. That doubled the following year, when $220.4m in property was restrained, with an average estimated value of $2.34m a property.

“The real property market can be exploited by money launderers in a number of ways, including utilising complex ownership structures to obfuscate true ownership, concealing illicit money flows as rental income, and investing illicit cash into property improvement activities,” an AFP spokesperson said.

“Criminal groups may use professional facilitators – such as real estate agents, accountants and solicitors – to give illegal cash the appearance of legitimacy through the purchase of assets, such as property.”

Real estate agents are regulated using licensing systems that differ across jurisdictions. In NSW anyone convicted of a dishonesty offence – or facing court proceedings for dishonesty offences – is deemed a disqualified person for 10 years, unless it is deemed trivial.

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Guardian Australia has identified two cases where agents convicted of dishonestly obtaining financial advantage were allowed back into the industry by Fair Trading within four years of unsuccessful appeals to the state’s civil and administrative tribunal.

A third individual who dealt with the proceeds of crime was found to be unfit for the sector by the same tribunal, only to be handed his licence back by the government the following year.

NSW Fair Trading said the three individuals had only been granted their licences back upon conditions preventing them from touching real estate-related trust accounts.

“The three persons applied for a real estate agent licence a number of years ago, were refused and these decisions were upheld by the NSW Civil and Administrative Tribunal (NCAT),” the tribunal said.

“After some time had elapsed these individuals then re-applied to NSW Fair Trading for real estate licences, which were granted after further information was provided to the regulator.”

In a fourth case, a convicted money launderer successfully appealed to the tribunal by arguing that money laundering was not explicitly included as a dishonesty offence in the laws governing real estate agents. That allowed him to avoid the 10-year prohibition and argue he was a fit and proper person to be in the real estate sector.

The state’s real estate laws have not been updated in the almost decade since that ruling. The industry peak group, the Real Estate Institute of Australia, said there was “no place for convicted money launderers” in the sector.

The ‘fit and proper person’ test

The NSW fair trading minister, Anoulack Chanthivong, said it was crucial the public was able to trust real estate agents, and said his government was “open to any changes needed to build trust and confidence”.

But Chanthivong said all real estate agents, including those with money-laundering convictions, still needed to pass a “fit and proper person” test.

“This test is broad and Fair Trading can perform financial and police checks to determine whether a person should receive a licence or whether a licence should be cancelled or suspended,” he said.

But Transparency International Australia, which is campaigning for the federal government’s money-laundering reforms, described it as a “Sydney Harbour Bridge-size gap” in the law.

“International regulators and the commonwealth government have clearly identified real estate as being at very high risk of money laundering involving organised crime gangs,” said the chief executive, Clancy Moore. “For example, in 2023 AFP busted an alleged Chinese $10bn money-laundering ring in Sydney which had office blocks, land near the second airport site and several mansions with harbour views.

“So the fact that a NSW real estate agent convicted of money laundering could get his real estate licence back seems like a Sydney Harbour Bridge-size gap in the regulations.”

Hundreds of complaints about unlicensed agents

Multiple jurisdictions are also fielding large numbers of complaints about unlicensed or unregistered agents.

In WA authorities fielded 873 complaints that referenced licensing and registration issues between 2019 and mid-2024.

Of those about 527 complaints specifically mentioned “unlicensed activity” as the cause of the dispute. About 52% of the complaints resulted in education or advice and 10% led to a formal warning. About 25% resulted in no offence being detected.

Six agents were prosecuted and six agents were fined during the same period for lacking registration.

NSW took action against 33 unlicensed agents in 2023 and so far in 2024. Thirteen were fined, 16 received warnings and four were given further education about the rules.

In Queensland authorities fielded 29 complaints about unlicensed or unregistered agents last year.

The Victorian regulator Consumer Affairs Victoria said it had received 70 contacts regarding unlicensed agents in 2023, and 59 contacts so far in 2024. Contacts can include either complaints or inquiries.

Guardian Australia also used the state’s public register to check the licensing status of 500 agents and agents’ representatives working in Victoria.

The names of thousands of agents were extracted from online real estate ads on popular property websites. A sample of 500 names were then checked against the state’s public register, a system designed to give transparency to the public about the status of their agent.

The process identified 30 agents for which an active licence could not be found. In nine cases, agents who were selling or leasing homes were listed on the register as having expired licences.

In about 20 other cases, no licence could be found on the public register.

New anti-money laundering laws

Consumer Affairs Victoria noted there may be other reasons why an agent was not appearing on the public register, including delays in registering with the state’s Business Licensing Authority, name changes or outdated website profiles of estate agents or agents’ representatives.

“We take reports of potential unlicensed trading very seriously and follow up on intelligence we receive from the community,” a spokesperson said.

The Real Estate Institute of Australia said the number of complaints about unlicensed agents was low and showed that state-based regulators were “catching and managing [them], which is the system working as it is intended”. The institute’s Victorian branch said it did not believe unlicensed activity in the state was common and said it checks the licensing status of agents prior to granting them membership of the industry body.

The WA branch said it did not believe unlicensed real estate activity was a significant issue, given the low number of prosecutions in an industry of 10,000 agents. This “demonstrated the vast majority of the industry is compliant with the legislation, and the regulatory framework effectively manages any instances of unlicensed activity”, the institute said.

The federal government’s reforms would force real estate agents to enrol with Austrac, the financial crime-fighting agency, develop a money-laundering program, do due diligence on customers, and report certain transactions and suspicious activities.

The industry has warned the requirements will pose a massive regulatory burden on the sector, particularly smaller operators.

The Real Estate Institute of Australia has warned the vast majority of real estate agents work in small businesses who do not have the resources to cope with the requirements.

It warned in its submission to the reforms that “the costs associated … would be prohibitive for the real estate sector and would most likely see the cost imposts leading to closures”.

Transparency International points to the experience of New Zealand, which implemented similar requirements in 2018, to rebut the sector’s claims.

Moore said four out of the five largest real estate companies in Australia also operate in New Zealand and have managed to implement and cope with the money-laundering laws for six years.

“Australia is one of only five countries globally that does not include real estate agents, lawyers and accountants as part of their anti-money laundering and counter-terrorism financing regimes,” he said.

“The commonwealth government proposals will ensure these professions help reduce the risk of money laundering and terrorism financing by doing greater customer due diligence checks and reporting any suspicious transactions to Austrac.”

 The Guardian Australia asks “Do you know more?” Email christopher.knaus@theguardian.com