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Austrac Investigates Chinese Suspicious Funds In Aussie property

Over the past year the Australian financial watchdog, the Australian Transaction Reports and Analysis Centre (Austrac) has investigated suspicious transactions worth over $3.3 billion carried out by Chinese investors, raising concerns that the country’s foreign ownership laws are being skirted in a big way.

According to a local media report, suspicious financial transactions of around A$3.36 billion were reported in 2015-16 by financial institutions like banks and money remitters to Austrac.

Of this amount, around $1 billion referred to investments made in properties.

Under Australian law, financial institutions are obliged to report any suspect transactions which are called suspicious matter reports and are required to inform Austrac of the possibility of wrong-doing in transactions, though they aren’t considered to be definite evidence.

Economy Times

These large scale fund transfers indicates the extent of Chinese investment into the Australian property market, as well as the extent to which foreign exchange regulations are being circumvented. China has put in place several stringent regulations to control capital outflow including a cap of US$50,000 in terms of foreign exchange purchase, but Chinese investors are getting around them through elaborate schemes to transfer money outside the country.

It has been an ongoing matter of concern in Australia that the heightened foreign buyer activity in its housing market was contributing to its heating up. Housing affordability has become a critical political issue in regions across the country. Recently elected NSW Premier Gladys Berejiklian has said that ensuring housing affordability was a top priority for her government.

According to latest data from an ANZ-Property Council survey, foreign buyers were reported to have made 21 percent of all residential purchases nationwide. The state of Victoria topped with foreigners accounting for 25 percent of all sales followed by the NSW with 24 percent.

This is broadly in line with Austrac reporting which shows that the maximum property-related transfers from China occurred in Victoria followed by the NSW.

Australia has in place several restrictions on property purchase by foreigners. According to existing laws, foreigner buyers cannot purchase existing houses, only new houses and dwelling units.

Andrew Su, a director with Compass Global Markets, a foreign exchange company said that a large segment of middle class Chinese investors feel that the renminbi is likely to be devalued significantly in the next few years and are therefore looking to safeguard their funds by transferring it out of China.

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