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Chinese cash property buyers

Discussion in 'General Property Chat' started by Madtaj, 27th Sep, 2016.

  1. Madtaj

    Madtaj New Member

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    A quick question as I'm quite a novice to the real estate game.....a friend of mine has just had a cash deal on a property in W.A. with a long settlement. The settlement agent was telling her that the Chinese buyer needs to get multiple family members to transfer his funds into Australia as the annual limit is $50,000 per year. how does this work in settlement? can this property deal fall over or is it legit?
     
  2. Jerry O

    Jerry O Well-Known Member Premium Member

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    Transferring large amount of money to the country and transferring multiple small amounts in short intervals could be flagged for investigation for money laundering. Maybe that is why the agent is asking for different people to transfer different amounts in. A bit risky I would say.

    Transferring from bank to bank however could be costly as your will be charge a certain amount from each banks.
    Have you tried getting advice from money remittance companies and inquire about what would be cost effective for your friend?
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Doesn't sound like the settlement agent is asking for multiple transfers but reporting what the buyer is doing. Nothing illegitimate about this from an Australian law point of view, but they would possibly be breaching chinese laws.

    Yes, the sale could fall over - what if they cannot get the funds in time.
     
  4. Shawn

    Shawn Well-Known Member

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    This is the second time I'm hearing this.
    My friend from India tells me there is something similar there too.
    Mum can transfer him $50,000 ; Dad can transfer him $50,000 and so on so forth.
     
  5. Madtaj

    Madtaj New Member

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    Yes for the purchase price of this property including stamp duty I worked out 15 family/friends would have to transfer money to make up the sale price.....I googled it, apparently it's called smurfing.
     
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  6. big max

    big max Well-Known Member

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    This is how it's commonly done.

    In terms of the contract the usual terms should protect you. That is if they fail to settle they forfeit deposit.

    Does buyer have citizenship?
     
  7. big max

    big max Well-Known Member

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    Correct.
     
  8. Madtaj

    Madtaj New Member

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    I am unsure about the citizenship status I am assuming the settlement agent would check this upon settlement? Not sure....
     
  9. Madtaj

    Madtaj New Member

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    Do they commonly get their money through or is it hard to do?
     
  10. New2prop

    New2prop Well-Known Member

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    Check if it is a gift. In India different limits apply to purpose of use of the funds and who does it (self, parent, blood relative etc)
     
  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    How could he check and why does that matter?
     
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  12. Redwood

    Redwood Well-Known Member

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    Hi there

    Chinese laws on transfer for electronic transfer have tightened up. Most of the time these guys will fill their pockets in their luggage and bring it into australia - yes, that is an issue if you don't declare it. In China, there are limits on how much you can transfer and the source of those funds, generally, the person will go to the bank with their neighbour or friend and use that name on the transfer and therefore each transfer will be under a different name.

    If you are worried about settlement, you can do a term contract or increase the deposit required. Not sure on the laws in WA, but can the deposit be released? If yes, you are walking away with the deposit in any case.

    The other point is the agent should check if the chinese buyer has FIRB approval. This is another problem, but as you can see our government is useless at regulating this.

    Many chinese deals are falling over due to the banks not lending to non-residents, there are more options now, however, this is a major concern of developers.

    Cheers Ivan
     
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  13. Jasmine

    Jasmine Well-Known Member

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    In China there is a USD$50,000 limit on the funds that locals can send overseas per year. It's to stop what is called "Capital Flight". However, it is legal to just fill a suitcase and carriage it into Australia as long as they declare it. No charge nor fee. Just keep in mind that the Australian Property market is a Money Laundering hotpot. Flood of dodgy Chinese money has AUSTRAC worried - MacroBusiness

    However, there are many ways to get money "out of China". They can setup a company in Australia (and purchase property using that company), or just buy Bitcoin in China and "cashout" in Australia/USA. There are many methods some more sophisticated than others.

    It is also very common for Asian family and friends to pool their money and buy property 100% in cash. Then mortgage the property and use/return the money to help the next family/friend member for another all cash purchase.
     
  14. Jasmine

    Jasmine Well-Known Member

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    Never heard of "Smurfing". I know it as "Structuring" payments/withdrawals to avoid reporting obligations.
     
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  15. Redom

    Redom Mortgage Broker Business Member

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    A number of our neighbouring asian countries and the sub-continent have capital controls that stop the free flow of capital out. They often use it as a cyclical economic management tool. There's usually ways around it for the consumer, but they may be in breach of their relevant countries law.
     
  16. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    One way around it is for money not to move across boarders at all.

    Person A in China wants to send $100,000 to Australia. Person B in Australian wants to send $100,000 to China.....

    Feichien in Chinse, or Hawala in Urdu.
     
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  17. big max

    big max Well-Known Member

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    Basically the same thing except smurfing is done when different people all transfer amounts basically at the same time to enable a single transaction to be completed.