Current estimates are that the value of money being laundered through Australian banks by criminal enterprises approaches $12 billion per year. This amount is equivalent to about 1% of Australia’s GDP - except that it adds nothing to it. In the roughest of terms, it suggests that as many as 1 out of 100 Australian adults may be involved in criminal activity.
The numbers are staggering. The $12 billion per year represents only criminal profits, so the amount of money involved in all aspects of criminal activity is much higher. Such penetration into the fabric of Australian society touches everyone.
Money laundering has been a fact of life ever since banking services became generally available. It involves all aspects of the financial services made available to the public.
As financial services have become more sophisticated so have the activities of criminals who manipulate the banking/financial system for their own ends. Prior to the events of 9/11/2001, the focus of law enforcement, world-wide, with respect to money laundering had been almost exclusively on criminal activity. Since then efforts to curb the financing of terrorism has been conjoined with anti-money laundering initiatives because much the same mechanisms are used.
Very little publicity is given to the battle against money laundering activities by the Federal Government. I suspect that the low profile is deliberate because the extent of criminal endeavours in Australia would be a significant shock to the general population. We do tend to live in an era where ignorance equates to bliss and where the prevailing public thought is that the government and the police are successfully tackling the problem and that the rogue element is small.
World-wide, the extent of money-laundering is estimated at $300 billion annually. With such significant amounts at stake it would be tempting to think that the very best technical minds in IT and law enforcements are developing the necessary technologies to tackle the problem.
Be prepared for another shock - it is not so. In fact, technology is almost impotent in its ability to detect illegal money movement activity. The sheer volume and amounts involved in daily transactions, in the global financial system, completely overwhelms the ability of technological oversight.
So what is our response to this challenge? It is AUSTRAC. The following is from the home page of the Australian Transaction Reports and Analysis Centre:
The Australian Transaction Reports and Analysis Centre (AUSTRAC) is Australia's anti-money laundering and counter-terrorism financing regulator and specialist financial intelligence unit. AUSTRAC was established under the Financial Transaction Reports Act 1988 (FTR Act) and is continued in existence by the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act).
In our regulatory role, we oversee compliance with the requirements of the FTR Act by a wide range of financial services providers, the gambling industry and others. Since 12 December 2006, we also oversee compliance with the AML/CTF Act, which comes into effect on various dates from 12 December 2006 to 12 December 2008.
In our intelligence role, we provide information to State, Territory and Australian Government law enforcement, security, social justice and revenue agencies.
Among the many initiatives implemented by AUSTRAC is a requirement upon Australian financial institutions to report all financial movements of amounts exceeding $10,000. Effectively, moving $9,999.99 is not reported. This is not an oversight or a loophole. Irrespective of what the threshold amount is, one cent less means regulatory invisibility. The only way to close this loophole would be set the threshold low enough to be impractical as a method of moving money. Unfortunately this would be impossible, requiring government IT resources that would almost duplicate what was being used in the whole private sector.
Acknowledging the loophole’s propensity to be exploited, AUSTRAC have introduced a different regulatory initiative which has placed the burden of detecting all money laundering activities upon the banks and other financial institutions. It is now obligatory for all Australian financial institutions to train their staff in anti-money laundering detection.
So you friendly bank teller/bank manager/financial services officer is now an honorary policeman/woman. As you might imagine, the ability to effectively train tens of thousands of workers in anti-money laundering techniques and the true effectiveness of the people being trained is questionable. The result is that our bankers are required to suspect everyone and report all suspicions. The rationale, actually quite reasonable, is that the frontline employees will know their customers well enough to ascertain when something unusual has happened. At this point, they are obliged not to analyse but to report. To ensure that there is the appropriate response, draconian penalties are included in the AUSTRAC legislation for both the businesses and employees that fail to notify suspicious transactions or who abet them.
That the burden is now falling upon the businesses says much about how difficult this aspect of criminal activity is to eliminate.