Australia is considering tightening its anti-money laundering regulations to include precious stone dealers and real estate agents following a warning from the Financial Action Task Force (FATF) over potential illicit cash entering the country. While strengthened rules would not target any particular country, Australian authorities are reacting "following a surge of cash from wealthy Chinese buyers looking for a safe haven away from the market turmoil of their home markets," Reuters reported.
"Property has long been on Chinese buyers' radar, but in recent months they have been snapping up Australia's rare pink diamonds, part of an unprecedented capital outflow from China that is rattling Beijing," according to the report. Australia produces 90% of the world's pink diamonds. The FATF, which evaluates countries' ability to combat illicit financial flows, told Reuters a lack of scrutiny by Australian authorities in the precious stones and property sectors was "an increasing high risk" in the global fight against money laundering and financing of extremists. The Attorney General's Department is reviewing its rules to address those concerns, people familiar with the plans said. The rules already cover banking, remittance and gaming.
"The review is considering the potential extension to services that pose high money laundering and terrorism risks, including services provided by precious stone dealers, lawyers, accountants and real estate agents," a source told Reuters. Under Australian regulations, foreigners can spend millions in cash on precious stones or a prime property without having to identify themselves or the source of their funds.
"Rich Chinese are coming to Australia to buy pink diamonds; only the finest and rarest of pinks are mined here," said Rami Baron, president of the Diamond Dealers Club of Australia. "We are in full support of all steps which eliminate the rogue element in our industry. However, we are neither police nor the tax man." Sellers of diamonds are under no obligation to ask buyers where their funds come from, Baron said. The price of pink diamonds has nearly doubled in the last five years, the report says. Jewelers say one carat of top quality pink diamond can cost more than $690,000 compared with $16,000 for a flawless white stone.