What is Money Laundering?
Money laundering is the process where profits that are derived from illegitimate means are given the appearance of coming from a legitimate source. Money laundering allows people to use funds from proceeds of crime for personal use because it turns ‘dirty’ money into ‘clean’ money.
The money laundering process can be split into 3 stages:
- Placement is the initial stage where physical cash from proceeds of crime enters the financial system.
- Layering occurs where illegal funds are moved around to disguise or conceal their illegitimate source.
- Integration is the final phase where the proceeds of crime funds appear to have a legitimate source and are then able to be used without raising suspicion.
Money is laundered in variety of different ways. These include:
- Splitting up large amounts of cash and depositing them separately into bank accounts to avoid creating suspicion;
- Purchasing money orders or cheques with illegitimately obtained funds and then depositing them into numerous bank accounts;
- Moving money around, usually through a number of quick transactions, to create money trails and make it difficult to trace the money back to its original source;
- Buying real estate, luxury assets, investing in businesses or other forms of investment so that money appears as legitimate assets;
- Using gambling platforms to place illegitimately obtained money into gaming machines or purchasing casino chips and cashing them out;
- Channelling money through a complex and intertwined web of legitimate businesses and ‘shell’ companies;
- Using people, who are usually paid a commission, to carry out small transactions or smuggle cash into or out of the country; and
- Sending numerous smaller value wire transfers to many overseas-based beneficiaries in a short period of time.
People attempt to launder money for a number of reasons, including:
- Hiding or distancing themselves from illegally obtained money and assets to avoid detection and prevent the assets from being seized by law enforcement agencies;
- Evading tax implications which would ordinarily need to be paid on the funds; and
- Attempting to legitimise profits by investing funds in businesses.
Money Laundering and the Law
At the State level, money laundering is dealt with by Part 4AC of the Crimes Act 1900 (NSW). If charges are bought under this part of the Crimes Act, a person may be liable for imprisonment for 20 years, if found guilty of the offence of money laundering. The prosecution must prove beyond reasonable doubt that the person has knowingly dealt with the proceeds of a crime and that they deliberately tried to conceal their use of those proceeds.
If a person has dealt with the proceeds of crime knowingly but did not try to conceal it, the maximum penalty is reduced to 15 years.
If a person has been reckless in dealing with the proceeds of crime, the maximum penalty is 10 years.
Money laundering offences are defined in Part 10.2 of the Criminal Code Act 1995 (Cth) under the Commonwealth regime.
The offences operate on a sliding scale of seriousness. The Court must firstly consider how much money is involved in the offence. Penalties range from the least serious (amounts less than $1,000) to the most serious (amounts in excess of $1 million). The second consideration the Court must take into account is what level of knowledge the person had of the illegally obtained money – negligent, reckless and intentional.
The most serious offence of laundering over $1 million with intent carries a maximum penalty of 20 years imprisonment.
|Value of money/ property||$1million or more||$100,000 or more||$50,000 or more||$10,000 or more||$1000 or more||Any value|
|Penalty||Ss (1) Intention||25 years||20 years||15 years||10 years||5 years||12 mths|
|Ss (2) Reckless||12 years||10 years||7 years||5 years||2 years||6 mths|
|Ss(3) Negligent||5 years||4 years||3 years||2 years||12 mths||10 p/units|
Anti-Money Laundering and Counter Terrorism Financing Act
The Anti-Money Laundering and Counter Terrorism Financing Act 2006 (Cth) (AML/CTF Act) was introduced in 2006 to phase out the Financial Transaction Reports Act 1988 (Cth) (FTR Act).
The FTR Act established the Australian Transaction Reports and Analysis Centre (AUSTRAC), and its existence is continued under the AML/CTF Act. AUSTRAC is the regulatory body which monitors compliance with money laundering legislation. It also acts as Australia’s financial intelligence unit and collects financial transaction reports from financial entities to identify and analyse suspicious financial activity. These reports assist AUSTRAC to identify money laundering activities and methods. AUSTRAC works with State and Federal Police in identifying and prosecuting financial crime in Australia and overseas.
Proceeds of Crime and the Law
The Criminal Assets Recovery Act 1990 (NSW) gives significant power to the NSW Crime Commission in terms of investigation and the ability to compel people to provide evidence. Quite often the first that a person knows of the involvement of the Crime Commission will be service of Seizure Orders obtained from the NSW Supreme Court restraining the sale or disposal of the property of that person – which may include cars, property, jewellery, shares etc.
The person named in the Orders must submit information about their financial affairs and may be compelled to give evidence in secret at the Commission or be examined in the Supreme Court. The penalties for giving false or misleading information include imprisonment as well as pecuniary penalties. Orders can be made for the ultimate forfeiture of illegally obtained property, or property tainted by the fact that it was somehow involved in the commission of the serious criminal offence.
The NSW Police and DPP tend to take action using the Confiscation of Proceeds of Crime Act 1989 (NSW). This is a conviction based Act, where, as a general rule the Act is invoked when property becomes tainted or substantially connected to the offence.
Federal offences may lead to action being taken under the confiscation of Proceeds of Crimes Act 2002 (Cth).
Both of the NSW Confiscation of Proceeds of Crime Act and the Commonwealth Proceeds of Crimes Act have little regard for hardship – for example the acts of a husband may have financially devastating effects upon the wife and children. There is no discretion in forfeiture orders under these acts – if part of a house was financed through serious criminal activity, the whole house would be forfeited.
How We Can Help You
At Nyman Gibson Miralis, we have a high degree of expertise and experience in dealing with Money Laundering and Proceeds of Crime matters.
- Assist in giving you advice on how to comply with Anti-Money Laundering legislation;
- Represent you at the State or Australian Crime Commission;
- Challenge restraining orders preventing you from accessing your assets; or
- Defend you in criminal proceedings.
We have an international practice and our solicitors often travel from Sydney to Asia and the United States of America to advise clients about the law and their rights.