Money Laundering in Australia

The Australian Transaction Reports and Analysis Centre (AUSTRAC) recently published Money Laundering in Australia 2011, a consolidated picture of money laundering activity in Australia, key vulnerabilities and emerging threats. The report is drawn from Australia's first (classified) National Threat Assessment on money laundering, produced as part of the Commonwealth Government's Organised Crime Response Plan. 

Every year, crimes such as drug importation, fraud, people trafficking, migrant smuggling, corruption and theft generate large amounts of money, usually in cash. Money laundering is the processing of these proceeds of crime to conceal their illegal origin  -- turning "dirty" cash into "clean" money.  

According to the Australian Crime Commission, more and more organised crime groups in Australia are becoming involved in money laundering so they can enjoy their illicit profits or reinvest the proceeds of crime into other criminal activities. Estimating how much money is actually laundered in any given country or globally is difficult, given ts covert and often transnational nature.  However, the Australian Crime Commission estimates that organised crime costs Australia from $10 billion to $15 billion per annum. AUSTRAC notes that that, by some estimates. more than $1.5 trillion of illegal funds are laundered worldwide each year, $200 billion of this in our region.

Typology reports and case studies produced by AUSTRAC, its international counterparts (such as FINCEN or FINTRAC), the Egmont Group of Financial Intelligence Units, the Financial Action Taskforce (the global standard setting body for anti-money laundering and anti-terrorism financing), and its regional counterparts, show how sophisticated, entrepreneurial, and well organised criminal groups are able exploit weaknesses in national and international regulatory systems and in business products and services to launder funds.

Money Laundering in Australia 2011 identifies a number of significant money laundering channels. It notes the ongoing use of the banking system to launder funds. The sheer size and complexity of banking systems globally offer opportunities to conceal illicit transactions. The gaming sector (casino based operations, on line gambling, and electronic gaming machines) is another traditional channel for money laundering, with opportunities to conceal funds afforded by the high transaction volume and high cash turnover. 

The report notes that criminals are also targeting money transfer businesses and alternative remittance dealers, who transfer funds (or value) within and between countries, often outside the formal financial system. There are some 7000 small businesses in Australia in this sector, most operating under the banner of a large network. They typically conduct high volume, low value transactions (in the last financial year, AUSTRAC received international funds transfer reports from this section amounting to some $8.2 billion). Law enforcement has also identified specialist money laundering syndicates using remittance businesses to launder funds for crime groups, without themselves being involved in the crimes which generated the profits -- as exposed by Taskforce Gordian, established in 2005 to investigate the structures and networks used by organised crime.

Money laundering is not restricted to financial transfers or cash transactions, but can involve a variety of high value commodities, including real estate, financial securities, and purchase of luxury goods (precious stones and metals, cars, yachts, antiques and art).  AUSTRAC identifies this as another significant channel for money laundering in Australia by both Australian based and overseas based crime groups.  High value goods provide a convenient and flexible way of disguising, holding and transferring and transporting criminal assets within Australia and overseas, and then of converting them into legitimate funds.  In 2010-11, the Commonwealth Government recovered some $13 million in criminal assets, including cash, houses, boats, motor vehicles and other items; and the Australian Federal Police retrained $41 million in assets, including cash, residential properties, a light aircraft and luxury vehicles.

Among the less visible money laundering channels, Money Laundering in Australia 2011 notes the use by criminals of complex corporate vehicles (including companies, trusts, foundations and partnerships) to launder funds or support criminal activities; and to the use of professionals such as accountants and lawyers to, knowingly or unwittingly, facilitate money laundering schemes.  A recent report by the World Bank, The Puppet Masters, similarly emphasises the central role played by such corporate vehicles in concealing the proceeds of large scale corruption.

It will be interesting to see if the release of this report heralds a renewed commitment by the Government to addressing vulnerabilities in industry sectors which pose significant money laundering risks (including dealers in precious metals and stones, lawyers, accountants, real estate agents and trust and company service providers) but which are not currently regulated, or only partially regulated. 

Currently Australian anti-money laundering legislation covers only the financial sector, the gambling sector, bullion dealers, remittance dealers and other professionals or businesses that provide particular 'designated services' (as defined in section 6 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006).  The Act imposes certain obligations on these regulated entities to  detect and deter money laundering and to provide financial intelligence to revenue and law enforcement agencies.
When the Anti-Money Laundering and Counter-Terrorism Financing Act was enacted in 2006, it was anticipated that the second tranche of legislation would follow shortly thereafter.  Draft legislative provisions were released for pubic consultation in 2007. This was subsequently deferred to allow time for recovery from the Global Financial Crisis.

While legislation was enacted in 2011 to tighten regulation of the alternative remittance sector, and to implement a cost recovery supervisory levy, Parliament has not seen the second tranche of legislation which would cover real estate agents, dealers in precious metals and dealers in precious stones, as well as a range of non-financial transactions provided by accountants, lawyers and trust and company service providers, and thereby bring Australia into closer conformity with the FATF standards.


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