Thank you, Attorney-General.

I acknowledge the traditional custodians of the land that we meet today, the Ngunnawal people, and pay my respects to their Elders and to their beautiful country.

It’s an honour to be here at the National Press Club to launch Australia’s latest national risk assessments on money laundering and terrorism financing.

These risk assessments form the basis of our understanding of the nature and scale of money laundering and terrorism financing challenges in Australia. 

In addition to drawing on the expertise of AUSTRAC’s own analysts, these assessments rely on the information sourced from public and private sector institutions 

• from 111 of our reporting entities and industry partners, from 35 international financial intelligence units 
• From Examining over three years’ worth of data from commonwealth prosecutions, just over 1200 prosecutions of money laundering offences 
• And looking at millions of data points in AUSTRAC’s data holdings to look at trends as well as Assessments of our own and our partners’ criminal intelligence 

Due to time, today I’ll focus specifically on money laundering. What the money laundering risk assessment shows us is that Australia’s economy is exploited by money launderers. Lawful domestic financial channels remain fundamentally important pathways for money launderers to place, to layer and to integrate funds domestically and internationally.

Our stable political system, and our open and free economy, our independent legal system, our well-developed financial services sector and our strong real estate market make Australia a great place to do business. These features also make Australia an attractive destination to store and integrate criminal proceeds into the financial system.

Drug offences are the single largest source of money laundered in Australia, but there’s also significant money laundered from tax and revenue crimes, government-funded program fraud, proceeds of illicit tobacco sales, and the global proceeds of scams. 

Criminals are persistent in their exploitation of channels that have historically been used to launder funds, such as banks, remitters and casinos as well as high-value assets, such as luxury goods and real estate. Criminal use of digital currency, digital currency exchanges, unregistered remitters and bullion dealers is increasing and posing greater risks.

The increased speed of financial transactions in recent years has made it harder for financial institutions to identify and freeze suspicious transfers before funds leave an account. This is further complicated when individuals open and transact through multiple products across multiple financial institutions.

The lack of Money Laundering Controls in non-financial businesses is creating a significant hole that many criminals are simply walking straight through. 

The money being laundered in Australia is extensive. If we take just one type of crime alone, drug dealing. We know, through the good work of our colleagues in the Australian Criminal Intelligence Commission, that the value of the Australian domestic Australian drug market is at least 12.4 billion dollars a year. That’s 12.4 billion dollars of illegal money. All that needs to be laundered through the Australian economy, every year. And that’s one single type of crime.

A further specific money laundering threat is that a number of Australia’s illicit markets are linked to criminal markets and organisations operating in Asia. These include large and highly functional international drug-trafficking organisations that control supply chains into Australia, as well as highly organised and sophisticated professional international money laundering organisations that have a demonstrated capacity to launder funds into and out of Australia. Australia’s extensive economic relations and trade with Asian markets also provide legitimate financial pathways that can mask illicit transfers often through trade based money laundering. The international trade system is subject to a number of vulnerabilities that can be exploited. Large volumes of global trade flows provide opportunities to obscure individual illicit transactions especially when combined with foreign exchange transactions or diverse trade financing arrangements. 

To give you an example of the scale and sophistication of money laundering operations: one such operation that was dismantled by the AFP in Australia operated as a criminal remittance and banking service able to make significant sums of money available to clients almost anywhere in the world within 24 hours. The organisation moved an estimated $10 billion over four years and had the capacity to move up to $1 million an hour. It even set its own exchange rates.

The organisation had a sophisticated informal value transfer system in place to make funds available overseas. By exploiting digital currency trading, domestic and foreign shell companies, and multiple offshore bank accounts, the organisation effectively operated as an underground bank with global reach.

Australia’s major banks are almost certainly still exposed to significant money laundering risks. Australia’s major banks have made substantial financial, technological and human investment in sophisticated anti-money laundering programs, and contribute vast amounts of reporting to AUSTRAC that is shared and used by law enforcement agencies. These efforts have made it harder for criminal organisations to launder money through major banks. Nevertheless, the size of these banks’ customer base, scale of operations, the scale of their cash transactions and their global reach means they are still exposed to significant money laundering risks. 

Financial remittance service providers, especially unregistered service providers, pose high money laundering risks. Despite concerted law enforcement attention, unregistered remitters continue to operate in Australia and often feature in large-scale money laundering investigations. In some instances, strong links exist between unregistered remitters and international money laundering organisations.

18 months ago, the AFP investigated a highly sophisticated global criminal organisation suspected of operating and controlling one of Australia’s largest independently-owned remittance businesses. The organisation used the vast scale of the remittance business to help mask the movement of at least $229 million of criminal proceeds into and out of Australia. Unlike other money laundering organisations that prefer to operate covertly, the syndicate was uniquely overt, operating legitimate shopfronts across the country. In addition to servicing thousands of legitimate customers, it also serviced criminal customers, including helping to create fake business documents, invoices and bank statements to avoid regulatory detection.

The investigations resulted in arrests and restraining orders relating to more than $50 million in residential and investment properties. 

The purchase of luxury goods and bullion continues to pose a high money laundering vulnerabilities. Criminals use luxury goods to both store and transfer criminal proceeds. In Australia, high-value watches, jewellery, designer accessories and apparel are commonly identified in money laundering investigations.  Luxury goods are attractive for money laundering for a range of reasons, in particular, they’re easily obtained and easily transported. 

Fraud against the Australian taxation system is a significant source of laundered funds in Australia. We estimate that tax fraud could increase to over a billion dollars annually. 

In a joint ATO and AFP investigation into a large scale tax fraud and money laundering scheme, an investigation involved a syndicate conspired to withhold and launder $105 million owed to the ATO.

Illicitly obtained funds were invested into luxury assets including a boat, cars, motorbikes and an aeroplane. A legitimate payroll company, run by the syndicate members, accepted money from legitimate clients to process payroll, transferring funds to sub-contracted companies, which made payroll payments to workers of their clients. Those companies were fronts, with straw directors, but controlled by syndicate members. These companies partially remitted tax obligations to the ATO, but redirected remaining funds through a complex series of companies and trusts to accounts controlled by syndicate members. The methods used include: the use of separate foreign secrecy jurisdictions for banking and company incorporation; the use of corporate vehicles including trusts and shell companies; the use of multiple professional facilitators including solicitors, accountants and company service providers; and the use of false invoices to disguise funds transfers as loans.

Digital currencies are increasingly being used to allow criminal groups to move funds across borders quickly, cheaply and pseudonymously. Digital currency as a means to transfer value is a complementary channel to traditional and entrenched money laundering channels. It’s growing quickly and its use becoming ever more sophisticated in moving money between jurisdictions. Quick trades through multiple digital exchanges and digital currencies in unregulated jurisdictions, with funds then appearing in legitimate banks in less regulated jurisdictions, make it hard for Australian financial institutions to trace the true source of these funds. 

We see ongoing risks in a number of enabling functions that still lie outside Australia’s Money Laundering framework. 

Lawyers can facilitate money laundering, including unwittingly, through the provision of their professional services. Law enforcement agencies are consistently identifying criminals who seek out and exploit the advice and services of lawyers to legitimise their activity and obfuscate the proceeds of crime.

Domestic criminals rely on lawyers, who often work alongside other professionals such as accountants, financial advisers and offshore service providers, to conceal illicit funds and beneficial ownership.

In one instance involving more than $100 million of taxation fraud,

a partner at a law firm used his access to the practice’s trust account to knowingly launder over $24 million in criminal proceeds from the syndicate’s activities. He created a false document trail using straw directors to ‘authorise’ trust distributions.

Separately, an accountant became a critical trusted adviser to the same syndicate. He misused his firm’s trust account to counter criminal proceeds and supply funds to co-conspirators. He facilitated fund transfers through fraudulent companies, committed legal document fraud and destroyed evidence. 

We rate real estate as posing a very high risk of money laundering in Australia. We see property purchases consistently in our financial intelligence as a way for organised criminals and transnational organised crime to store wealth in Australia. We have seen examples of people associated with organised crime managing significant real estate portfolios, using professional facilitators to manage those portfolios. Significant property purchases are repeatedly appearing in financial intelligence and in law enforcement operations. Even a single example of an overseas family with members on an Interpol red list buying over $750 million worth of Australian commercial and residential real-estate. Including a single cash based property purchases over $30 million.

While this sector remains outside of Australia’s Money Laundering regulation it will remain a very attractive means for criminal groups globally to launder money and store their wealth and continue to allow those who profit from drug and human trafficking, child exploitation and international frauds to profit from their crime.  

These risk assessments we’re launching today show the scale, the ingenuity and overall threat that money laundering and terrorism financing presents to Australia. They highlight the challenges facing us all posed by rapid developments in technology, payment and financial systems and the ongoing criminal opportunities. They show that despite huge law enforcement and industry effort, without greater statutory coverage of all money laundering risks and the passage of the proposed AML reforms, Australia will remain an attractive location for international criminals to move and store their wealth. 

I encourage you to take the time to read these assessments, including online at AUSTRAC.gov.au, and together we can make further inroads in disrupting money laundering and terrorism financing.

Thank you.