What is money laundering?

Money laundering is the process of obscuring the origin of illegally obtained profits, also known as “proceeds of crime”, so that they appear legitimate. Money laundering allows people to use proceeds of crime while avoiding criminal detection. It also helps prevent their assets from being seized and assists them in evading tax obligations.

 

The three stages of money launderingMoney Laundering and Proceeds of Crime

The money laundering process can be split into three stages:

  1. Placement: cash from proceeds of crime enters the legal financial system.
  2. Layering: the funds are moved or converted to obscure their source.
  3. Integration: the funds are extracted from the apparently legitimate source and can be used without raising suspicion.

 

Money laundering methods

Money can be laundered in a variety of ways including:

  • Splitting up large amounts of cash and depositing them into separate bank accounts.
  • Buying real estate, luxury assets, or investing in businesses.
  • Placing illegitimately obtained money into gaming machines or purchasing casino chips and cashing them out.
  • Channelling money through businesses and “shell” companies.
  • Moving money around through a series of quick transactions to create money trails and obscure the original source.
  • Sending numerous smaller value wire transfers in a short period of time.

 

What are proceeds of crime?

Property is the proceeds of crime if it was directly or indirectly derived from the commission of an offence. “Property” has a broad meaning and includes real and personal property, tangible and intangible property. It includes cash, a house, a yacht, a car, and bank accounts.

 

Anti-money laundering (AML) in Australia

Australia has a complex legislative and enforcement regime to detect, monitor, and criminalise money laundering, as well as to confiscate related assets.

The Australian Transaction Reports and Analysis Centre (AUSTRAC) is Australia’s dedicated anti-money-laundering regulator and specialist financial intelligence unit. The Australia Federal Police (AFP), Australian Criminal Intelligence Commission (ACIC), State Police, and NSW Crime Commission can all investigate money laundering activity.

For more information on these regimes and complying with AML obligations, see our page on anti-money laundering compliance and advice.

 

Money laundering offences

The money laundering offences are broad with the capacity to apply to a large range of activities relating to money or other property used in connection with, or arising from, serious crime.

 

NSW regime

At the state level, 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.

 

Commonwealth regime

Commonwealth money laundering offences are defined in Part 10.2 of the Criminal Code Act 1995 (Cth). 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.

The offences operate on a sliding scale of seriousness. The court must first 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 $10 million).

The second consideration is the person’s level of knowledge concerning the illegality of the money: negligent, reckless or intentional.

The most serious offence, laundering more than $10 million with intent, carries a maximum penalty of life imprisonment.

 

Range of penalties under the Commonwealth regime

The table below illustrates the range of potential penalties under the Criminal Code Act based on the amount of money involved in the offence, and the person’s level of knowledge concerning the illegality of the money.

Section of Act 400.2B 400.3 400.4 400.5 400.6 400.7 400.8
Value $10 million or more $1million or more $100,000 or more $50,000 or more $10,000 or more $1000 or more Any value
Penalty for acting intentionally Life imprisonment 25 years 20 years 15 years 10 years 5 years 12 months
Penalty for acting recklessly 15 years 12 years 10 years 7 years 5 years 2 years 6 months
Penalty for acting negligently 6 years 5 years 4 years 3 years 2 years 12 months N/A

 

Confiscating proceeds of crime

Persons can be deprived of assets derived from serious criminal activity whether or not they were convicted of a criminal offence.

Property derived from a crime may be forfeited under three different legislative regimes. The main aim of these acts is to prevent people from benefitting from criminal offences, and to preserve evidence. Many of the provisions impose significant financial burdens on a defendant.

The regimes include:

Proceeds of Crime Act 2002 (Cth) – under this Act, the AFP and Commonwealth Director of Public Prosecutions (CDPP) can apply to withhold proceeds of crime concerning Commonwealth offences under one of the following types of orders:

  • Freezing Order.
  • Restraining Order.
  • Forfeiture Order.
  • Pecuniary Penalty Order.

Confiscation of Proceeds of Crime Act 1989 (NSW) – under this Act, the NSW DPP, the Commissioner of the Independent Commission Against Corruption (ICAC), or NSW Police Commissioner can apply to withhold “tainted property” concerning NSW offences under one of the following types of orders:

  • Forfeiture Order.
  • Pecuniary Penalty Order.
  • Drug Proceeds Order.
  • Freezing Notice and Restraining Order.

Criminal Assets Recovery Act 1990 (NSW) – under this Act, the NSW Crime Commission can withhold proceeds of crime under one of the following types of order:

  • Restraining Order.
  • Forfeiture Order.
  • Proceeds Assessment Order.
  • Unexplained Wealth Order.

For more information on confiscating proceeds of crime see our page on freezing orders and asset forfeiture.

 

The Anti-Money Laundering and Counter Terrorism Financing Act

Anti-money laundering refers to the policies and legislation aimed at detecting proceeds of crime and preventing money laundering by imposing obligations on financial institutions.

Australia’s anti-money laundering laws create a complicated regulatory compliance regime, which is primarily governed by the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act).

The AML/CTF Act applies to “designated services” provided by financial institutions, bullion dealers, digital currency exchanges, the gambling industry, and remittance providers. Entities providing a designated service under the AML/CTF Act are “reporting entities” and must:

  • Enrol with AUSTRAC, Australia’s AML/CTF regulatory body.
  • Conduct customer identification, verification, ongoing due diligence and transaction monitoring.
  • Report suspicious matters, threshold transactions and international funds transfers.
  • Conduct money laundering and terrorism financing risk assessments.
  • Develop and maintain an AML/CTF program.
  • Conduct AML/CTF training for employees.
  • Make and retain records for seven years.

 

Frequently Asked Questions

What is AUSTRAC?

The Australian Transaction Reports and Analysis Centre (AUSTRAC)  is the Australian regulatory body which monitors compliance with anti-money laundering legislation. AUSTRAC is Australia’s financial intelligence unit, collecting transaction reports from financial entities to identify and analyse suspicious financial activity.

These reports assist AUSTRAC in identifying money laundering activities and methods. AUSTRAC then works with state and federal police in prosecuting money laundering and financial crime in Australia and overseas.

What happens to forfeited or confiscated assets?

Forfeited assets are given to the Commonwealth and placed into the Confiscated Assets Account, which is managed by the Australian Financial Security Authority (AFSA) on behalf of the Commonwealth. Those funds are generally reinvested into the community.

How can we help?

We are experienced in successfully defending money laundering and proceeds of crime charges. Contact us if you require assistance.

Money Laundering & Proceeds of Crime Articles