Australian authorities have been increasingly cracking down on money laundering and financial crime, through studying suspicious behaviour and transactions to aid in the detection and prosecution of offenders.
The Australian Transaction Reports and Analysis Centre (AUSTRAC) provides various case studies illustrating its key role in these investigations, also highlighting the common behaviours which may indicate money laundering and financial crime.
Key red flags include frequent large cash deposits or withdrawals, large fund transfers from business to personal accounts, high volume international fund transfers, and generally suspicious transactions that involve high risk jurisdictions, the use of third-party company accounts, or that simply don’t match up with the customer profile.
The following case studies illustrate how these red flags come into play in the investigation of money laundering and financial crime.
Case study 1: International money laundering
An Australian-based Hong Kong man collected millions of dollars in cash over multiple occasions from associates, travelling from Sydney to Perth and visiting banks and ATMs with other individuals to deposit cash into a variety of accounts. A total of 163 bank transactions estimated to be worth almost $30 million were made, with up to 10 bank branches visited per day.
Bank reporting of Threshold Transaction Reports enabled AUSTRAC to identify patterns of transactional activity consistent with money laundering.
A joint-agency task force was set up between AUSTRAC, Australian Federal Police, Australian Border Force and Western Australia Police, and AUSTRAC’s financial intelligence helped law enforcement to understand money laundering methodologies and identify suspects.
It was identified that a Hong Kong–based money laundering syndicate was operating in Australia. Ten offenders were arrested on money laundering and drug charges, with the syndicate’s key Australia-based member sentenced to 10 years in prison.
- Use of third-party company accounts to complicate transaction activity
- Third parties making regular cash deposits into business accounts
- Frequent cash deposits at different branches and ATMs on the same day
- Regular or multiple cash deposits just below the A$10,000 cash transaction reporting threshold
- High-value cash deposits and transfers out of new business accounts
- High-volume account activity involving significant amounts of cash
Case study 2: Overseas investment scam defrauding Australians
An Australian man was transferring millions of dollars overseas, including to a business in Romania.
Suspicions were aroused by Romanian authorities, who asked AUSTRAC to investigate the man’s financial activities. AUSTRAC discovered that the elderly man had been withdrawing large sums of money from his retirement savings to make the transfers to five businesses in Hong Kong, Bulgaria and Romania.
It was identified that the man was the victim of an ‘advance fee’ investment scam, deceived into sending payments with the promise of greater future monetary benefits. Further investigation revealed another 125 Australians who were likely to be victims.
AUSTRAC shared financial intelligence with its Fintel Alliance partners, leading them to blacklist the five overseas businesses. Intelligence was also provided to counterparts in the relevant jurisdictions to enable them to carry out criminal investigations and help Australian banks and victims to recover funds.
- High volume of international funds transfers from Australia for no apparent reason
- International funds transfers to a high-risk jurisdiction
Case study 3: Business owner jailed for illegal ‘phoenix’ activity
Over a 12 year period, an Australian man operated a labour hire business through four different companies, failing to pay GST and PAYGW to the ATO.
A second company was created to continue the business of the original company, which had been deliberately liquidated to avoid paying its debts, an illegal activity known as ‘phoenixing’. This process was repeated until a fourth company was created.
To distance himself from the companies, the man appointed family members and associates as directors. He claimed to be managing the business on behalf of these directors and earning a modest annual salary.
AUSTRAC’s analysis of financial data showed that over a number of years the offender had made several significant cash withdrawals totalling A$1.8 million from ATMs, including an A$650,000 cash withdrawal from ATMs at a casino. He also transferred A$831,000 from business bank accounts into his personal credit card accounts and other non-company bank accounts.
The investigation was supported by several financial institutions who submitted suspicious transaction reports to AUSTRAC, and helped authorities prove that the offender was using business income from the companies under his control to fund his lifestyle and gambling activity while evading tax.
The offender was found guilty of three counts of dishonestly causing a loss and 17 counts of obtaining a financial advantage by deception. He was sentenced to five years and four months’ jail and ordered to pay A$890,112 to the ATO.
- Frequent, high-volume ATM cash withdrawals
- Transfer of large cash amounts from business accounts into personal accounts
- Large cash withdrawals at casino ATMs
Whilst money laundering and financial crime represent a serious problem for Australia, authorities are becoming more organised and sophisticated in their investigations, using their knowledge of common red flags, advanced financial intelligence, and leveraging industry partnerships to make it increasingly difficult for offenders to evade detection and prosecution.