What is money laundering?
Money laundering is the process of “cleaning” illegally obtained profits so that they appear legitimate. The illicit profits are also known as “proceeds of crime”.
Money laundering allows people to use proceeds of crime in the Australian economy without being detected. It also helps prevent stolen assets from being seized by law enforcement and assists criminals in evading tax obligations.
What are proceeds of crime?
Profits (including property or money) are the proceeds of crime if they were directly or indirectly derived from the commission of an offence. “Property” has a broad meaning and includes tangible and intangible property, including cash, a house, a yacht, a car, and bank accounts.
Types of money laundering perpetrators
Money laundering is committed or facilitated by various individuals, groups, and entities. Money laundering perpetrators can include individuals, criminal groups, transnational criminals, and corporations.
A person facilitates money laundering when they assist a person or group to launder the proceeds of crime.
Individuals and criminal groups
Individuals and criminal groups engage in money laundering so that they can use the dirty money in the legitimate economy without being identified by law enforcement. Additionally, money that was obtained by tax evasion may also be laundered to hide the origins of the money.
These offenders may launder money in a variety of ways including:
- Structuring, which involves splitting up large amounts of cash and depositing them into separate bank accounts.
- Buying real estate, luxury assets, or investing in businesses.
- Placing illicitly obtained money into gaming machines or purchasing casino chips and cashing them out.
- Sending numerous small value wire transfers in a short period of time.
White collar criminals and corporations
In white collar crime, money laundering can be either intentional or unintentional.
Intentional money laundering involves individuals or businesses, usually professional service providers, actively laundering money either for themselves or as a facilitator for individuals or groups. Professional service providers include lawyers, accountants, real estate agents, and bankers.
Examples of intentional money laundering includes:
- Purposely creating fraudulent records to hide profits obtained from tax evasion.
- Moving money around through a series of quick transactions to create money trails and obscure the original source.
- Assisting in channelling proceeds of crime through businesses and shell companies.
Unintentional money laundering involves individuals or entities who facilitate or contribute to the laundering of proceeds of crime because of poor governance, oversight, and internal processes. Examples include:
- Poor record-keeping systems which mean that small or unusual transactions may not be captured.
- Failing to run “Know Your Customer” checks on new customers/clients which allows criminal individuals or businesses to open accounts.
- Failing to train employees in the relevant laws and regulations, which means employees unknowingly assist money laundering schemes or fail to report suspicious transactions.
Transnational criminal groups and Professional Money Launderers
Transnational criminal groups (TCGs) and Professional Money Launders (PMLs) are individuals or groups who offer specialist professional services to increase the effectiveness, scale, and obscurity of the movement of proceeds of crime.
TCGs launder proceeds of crime obtained through methods such as drug trafficking, human trafficking, or illegal trading in firearms. These crimes are often committed across multiple jurisdictions.
TCGs may engage in money laundering by moving cash to countries with weaker anti-money laundering (AML) laws, which could include buying property and assets in these countries. They may also use the services of PMLs to facilitate the money laundering.
PMLs can include accountants, lawyers, bankers, brokers, tax advisors, precious metals and stones dealers, and owners or insiders of electronic or cryptocurrency exchanges. The expertise of PMLs gains them popularity with criminals and criminal organisations.
PML activities commonly include techniques such as:
- Using foreign bank accounts and credit cards.
- Creating or purchasing foreign shell (non-trading) companies.
- Keeping money in “tax haven” jurisdictions.
- Investing in foreign real estate / luxury goods.
- Mixing illicit monies with legitimate funds when conducting international transfers / transactions.
Criminal Code Act 1995
The Criminal Code Act 1995 (Criminal Code), which applies to federal and commonwealth offences, includes several offences for money laundering at Part 10.2.
A person can be charged with money laundering if they deal with money or property and either:
- The money or property is, and the person believes it to be, proceeds of crime, or
- The person intends that the money or property will become an instrument of crime.
For individuals, the maximum penalty is life imprisonment, or a fine of 2,000 penalty units (A$626,0000). However, this only applies to money or property worth A$10 million or more.
For corporations, the maximum penalty is a fine of 10,000 penalty units (A$3,130,000).
The federal Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) and its related Anti-Money Laundering and Counter-Terrorism Financing Rules 2007 (AML/CTF Rules) also include money laundering offences.
Anti-Money Laundering and Counter-Terrorism Financing Act
Anti-money laundering refers to the policies and laws that detect proceeds of crime and prevent money laundering, primarily by imposing obligations on financial institutions and service providers. The AML/CTF Act applies to “designated services” provided by financial institutions, digital currency exchanges, the gambling industry, and remittance providers.
Each state has its own laws to deal with proceeds of crime. These laws target proceeds of crime gained through criminal offences under state law.
NSW has three pieces of legislation targeting proceeds of crime: the Crimes Act 1900 (NSW), Confiscation of Proceeds of Crime Act 1989 (NSW) and the Criminal Assets Recovery Act 1990 (NSW).
In NSW, money laundering is dealt with by Part 4AC of the Crimes Act 1900 (NSW). If charges are brought under Part 4AC, a person may be liable for imprisonment for 20 years. The prosecution must prove beyond reasonable doubt that the person:
- Dealt with the proceeds crime, and
- Knew that they were proceeds of crime, and
- Deliberately tried to conceal that the funds were proceeds of crime.
If a person has dealt with the proceeds of crime but did not try to conceal it, the maximum penalty is reduced to 15 years. If a person is reckless as to whether the funds were the proceeds of crime, the maximum penalty is 10 years.
Other offences under the Crimes Act include “dealing with property suspected of being proceeds of crime” (section 193C) and “dealing with property that subsequently becomes an instrument of crime” (section 193D). The maximum penalties for these offences range from three to 15 years.
Operation Avarus is the anti-money laundering strategy of the the Australian Federal Police’s (AFP), which guides the work of the AFP’s investigation and intelligence teams. The strategy outlines options to combat money laundering and disrupt the movement of illicit money and property.
Taskforce Avarus is the investigative arm of the AFP’s anti-money laundering strategy. The AFP works with other government agencies and partners to combat money laundering activities in Australia, including AUSTRAC (Australian Transaction Reports and Analysis Centre), Australian Border Force, and the Australian Criminal Intelligence Commission (ACIC).
Australian Federal Police (AFP)
The AFP is the Commonwealth’s law enforcement authority. The AFP combats organised crime, transnational crime, and other forms of activity that are offences under Commonwealth law. The AFP’s tools to combat crime include the tracing and recovering of proceeds of crime.
The AFP leads Taskforce Avarus, which has responsibility for investigating and litigating money laundering matters.
Australian Transaction Reports and Analysis Centre (AUSTRAC)
AUSTRAC is Australia’s dedicated anti-money-laundering regulator and specialist financial intelligence unit. It assists the AFP by collecting transaction reports from financial entities to then identify and analyse the reports for suspicious financial activity, which includes signs of proceeds of crime.
The AFP, ACIC, state police and NSW Crime Commission can also investigate and trace proceeds of crime.
Commonwealth Department of Public Prosecutions (CDPP)
The CDPP is the primary government agency responsible for the prosecution of proceeds of crime offences. The CDPP is assisted by AUSTRAC, the AFP and other Commonwealth and State departments and agencies in proceeds of crime prosecutions.
At the state and territory level, the respective state or territory public prosecutions office is responsible for prosecuting money laundering offences that breach state or territory laws.
Our anti-money laundering lawyers in Sydney
Nyman Gibson Miralis has been involved in some of the most significant and high-profile criminal litigation relating to money laundering and proceeds of crime in Australia. Our anti-money laundering lawyers are based in Sydney but provide strategic advice relating to both domestic and international investigations, including responding to regulators, law enforcement and prosecutors.
We have expert knowledge of the substantive laws under which all key law enforcement and regulatory bodies operate, and the practice and procedure of investigations and prosecutions. We also provide anti-money laundering compliance advice and AML/CTF programs.
Our anti-money laundering lawyers are widely recognised as experts in defending money laundering and proceeds of crime charges, as well as related criminal charges such as white collar crime, tax evasion, corruption and serious organised crime, and have acted and advised in investigations involving the USA, Hong Kong, Singapore, China, Cambodia, Cyprus, Russia, New Zealand, South Korea, and Europe, where there has been an Australian connection.