Analysis of SMRs over the three-and-a-half year period from January 2011 to June 2014 provides an indication of the activity of PEPs and public officials in Australia and the extent to which reporting entities have identified this activity as suspicious. The analysis showed that:
- AUSTRAC received approximately 950 SMRs that included the phrase ‘PEP or ‘public official’ as the grounds for suspicion.
- In addition to these SMRs, AUSTRAC analysis identified additional submitted SMRs that did not contain the phrases ‘PEP’ or ‘public official’ but instead listed the name of a specific known PEP.
- SMRs were submitted by various reporting entities, including financial institutions, remittance dealers, non-bank financial service providers, currency exchanges and casinos.
- The SMRs concerned PEPs and public officials from countries including, but not limited to, Australia, East Asia, South-East Asia and Pacific Island countries.
Suspicious activities reported in SMRs
SMRs were submitted on a range of suspicious activities, including:
- Account holdings and transactions involving spouses, other family members or associates and concerns surrounding the source and legitimacy of funds.
- Foreign PEPs using the bank accounts of their Australia-based dependants to move funds. For example, where a foreign PEP’s children are studying in Australia and hold accounts with Australian institutions, large amounts of money are moved through these accounts. Funds are moved to and from the PEP’s home country, which may also be identified as a high-risk jurisdiction (19).
- A foreign PEP transferred a large amount of funds to the personal bank account of an Australian resident. The Australian resident subsequently transferred the funds to their own mortgage account. The legitimacy of the funds is uncertain.
- PEPs receiving multiple cash deposits into their personal bank account from third parties within a short time frame. In some cases, the cash deposits consisted of foreign currency.
- Foreign PEPs with significant holdings in Australia, such as bank term deposits and other high wealth products such as shares and investment portfolios.
- A foreign PEP who is a principal shareholder in an Australian company which bought Australian properties. The company failed to disclose the PEP was a principal shareholder when buying the properties.
- An applicant for a large amount of funding for a development project in Australia is identified as a family member of a foreign PEP from a high-risk jurisdiction.
- PEPs and/or third parties circumventing cash transaction reporting requirements by depositing and withdrawing funds at different bank branches or remittance business locations on the same day in amounts below the AUD10,000 cash reporting threshold (20).
- Regular large withdrawals using bank cheques made payable to Australia-based businesses with no logical explanation. Cash withdrawals are then made from the business accounts of the Australia-based businesses.
- Funds from business accounts held in a high-risk jurisdiction are transferred to Australia-based business or personal accounts.
- A foreign national living in Australia is linked to a bribery or corruption matter in another country. The foreign national invests money in real estate and business activities in Australia. The legitimacy of the funds is uncertain.
- Multiple third parties exchange cash for gaming chips and vice versa at a casino, but undertake little or minimal gaming activity. After the exchange the cash or gaming chips are given to the PEP.
- A PEP receives large international funds transfers to a gaming account. The PEP withdraws a small amount for gaming purposes. The balance is subsequently withdrawn by way of cheque.
The above list of suspicious activities highlights some suspected methods and techniques used for laundering the proceeds of corruption.
- ‘High-risk jurisdictions’ are jurisdictions known to be a source of narcotics or other significant criminal activity, any jurisdiction subject to sanctions, jurisdictions known to be a secrecy haven or preferential tax regime, or jurisdictions linked to proscribed terrorist organisations.
- This is a money laundering technique called ‘structuring’. ‘Structuring’ involves the deliberate division of a large amount of cash into a number of smaller deposits to evade threshold reporting requirements. Under section 142 of the AML/CTF Act, structuring is punishable by up to five years imprisonment and/or 300 penalty units. Structuring can also involve the layering of funds for international funds transfers in an effort to avoid the transfers attracting undue scrutiny from authorities.