Australia’s leading banks are being grilled about their oversight of the investment activities of foreign buyers of domestic property.
Some of Australia's biggest banks have responded to inquiries from the House of Representatives economic committee on how they uphold foreign investment rules, as politicians step up scrutiny of purchases of Australian real estate by overseas buyers.
The responses indicate that banks have only limited knowledge concerning foreign clients or property investors within Australia, who could be misusing lent funds or laundering money from abroad for the acquisition of property assets.
Macquarie Group was asked if it had measures in place to ensure that loan clients were not abusing the Significant Investor Visa to purchase property in Australia.
The Significant Investor Visa, which enjoys the byname of the "888" visa due to the high esteem in which the number eight is held by Chinese numerology, enables affluent foreigners to acquire residential status in advance if they invest $5 or more in bonds, private companies or certain managed funds.
In response to the query Macquarie said that it did not engage in direct monitoring of how lent monies were utilised, although it did retain the power to withdraw loans or seize collateral in advance if they were diverted to purposes other than those initially advertised.
ANZ indicated a similar lack of strict measures for scrutinising client information. The banks said that it does not investigate the income sources of individual foreign buyers when making loans to domestic real estate developers, instead checking the post-codes for pre-sales to ensure their authenticity.
Steven Munchenberg, chief of the Australian Bankers' Association, said in a submission that banks were not in a position to investigate the funds of foreign buyers when making loans property developers due to lack of direct contact.
"Basically a bank will seek to ensure that the pre-sales contracts represent genuine sales," Munchenberg said. "The source of funding for foreign purchasers, however, is generally not investigated."
The responses from banks arrive just as allegations emerge from within China that one of its biggest banks has helped Chinese nationals launder money overseas to make property acquisitions.
China Central Television (CCTV) recently alleged that the Bank of China - one of the Middle Kingdom's big four banks as well as the world's fifth largest bank in terms of market capitalisation, has been running a program over the past several years for the specific purpose of helping cash-flush Chinese investors circumvent strict government capital controls, so that funds can be diverted overseas for either real estate investments or to facilitate emigration.
If the allegations are true, they certainly help explain how Chinese nationals have recently become the biggest investors in US housing and Australian commercial and residential property, despite Beijing restricting the amount of renminbi that individuals are permitted to convert into other currencies at a paltry USD$50,000 per year.