The Australian Transaction Report and Analysis Centre has
released a report on money laundering that aims to improve money
laundering detection and enforcement, while also increasing general
awareness throughout the public and industry sectors. Money
laundering has been described as a critical risk to Australia's
financial system and economy through its consequential effect of
corrupting individuals, businesses and government function, while
enabling serious and organised criminal activity to thrive.
A key focus of the report has been identifying the most
frequently used methods and strategies adopted in money laundering
activity, while also providing basic guidelines to assist in
triggering suspicion. Particular regard is given to methods
associated with banking, business, gambling and disbursement
through high-value goods. Less suspicious methods have also been
targeted, which include investment in professionals to maximise
financial gains, disrupting investigations and monitoring
cross-border transfers and investment.
How is money laundered?
Money is typically laundered via a three step process:
- First, through 'placement' - introducing illegal funds into the
formal financial system. Examples of such behaviour include
'fractioned' deposits into various bank accounts.
- Secondly through 'layering' - involving a series of moving and
dispersing illegal funds over a variety of accounts and holdings to
assist in concealing their true origin.
- Lastly, through 'integration' - where funds are re-invested
into legitimate businesses or expensive items, and are subsequently
disguised as legitimate funds.
Key features of laundered money include the 'mixing' or
'combining' of legitimate and illegitimate funds into the same
pool, engaging specialist money laundering syndicates in Australia
and overseas, and the 'internationalisation' of the funds - meaning
that at some point, the funds will be transferred offshore to
assist in concealing their origin.
Banking sector
The most significant money laundering channel is the banking
sector and its preferability stems from its large number of clients
and daily transactions, which better assist to disguise illegal
behaviour. Access to the banks is primarily achieved through
regular banking accounts, international money transfers, loans and
safe deposit boxes. This is compounded by ease of accessibility and
usability, particularly with recent advances in internet and mobile
banking technology.
Systems have been implemented to assist in detecting laundering
operations, such as policy obligations requiring banks to
communicate parties undertaking transactions with a value greater
than $10,000. Improvements in identity and fraud detection
alongside a broader scope for fraud-related offences are examples
of recent and successful responses by the Australian
government.
Money transfer businesses
These, and related remittance services, provide a popular avenue
to transport illegally obtained funds outside the formal and modern
banking systems. Funds are transported to countries without
detection measures in place, so the source of the finances
ultimately becomes undetectable.
A process known as 'cockoo-smurfing' has been particularly
popular over the last decade and is predominantly facilitated by
the co-operation of 'money transfer' businesses. The process
involves interfering with legitimate money transfers where a person
who is expecting to receive funds actually receives the same amount
from illegal proceeds, while the legitimately sent funds are then
transferred to the individual.
Recent amendments have increased regulation and registration
processes for 'financial transfer' bodies, rendering detection and
policing of illegal activity substantially more successful.
The gaming sector
Gambling venues have always been a popular system for laundering
to occur. Popular methods adopted include replacing cash for gaming
tokens, exploiting third parties to gamble or transact on the
criminal's behalf, involvement in high stakes gambling with
illegitimate money and laundering through online gambling.
Government response has increased casino 'flagging' - where
suspicious gamblers or transactions are to be reported to the
government body AUSTRAC.
High value goods
Criminals often purchase goods of high value as a means of
transporting and converting funds into legitimate finances.
Jewellery, artwork, boats and real estate are all commonly used and
legitimate and illegitimate funds are used to fund the purchases to
assist in concealing the laundering process. This area has been one
of particular concern due to the very few, if any, financial
indicators available to trigger suspicious activity.
The Proceeds of Crime Act 2002 has been a government
response to this phenomenon and empowers the policing bodies to
confiscate property where wealth cannot be explained. The power
operates even in the absence of a criminal conviction.
Alternative money laundering outlets
Organised crime syndicates are increasingly relying on the role
of professionals to assist in reducing suspicion and to assist in
providing effective and safe means to launder money. Cash intensive
businesses such as restaurants, hotels, pubs, taxi businesses and
certain retail venues are also used as a conversion source.
Government response and benefits
The response primarily involves gathering and compiling
financial information with domestic and international agencies and
government bodies, effective and co-ordinated investigation,
implementing effective and accurate statutory regulation that
hinders such conduct and increasing awareness to help create a
social environment more hostile toward money laundering. This
benefits the public through preventing and disrupting crime and
businesses through isolating transactions to legitimate
outlets.