Formula for laundering cash exposed
Powdered milk sales hide money trail Australian police track syndicates
BABY formula stripped from Australian supermarket shelves is being sent to China by money launderers in sophisticated scams to move crime profits offshore.
News Corp can reveal money-laundering syndicates are moving millions of dollars overseas by hiring an army of personal shoppers in Australia to buy up baby formula and other sought-after items and shipping them to mainland China for re-sale.
The shoppers, or “runners’’, are recruited by people in Australia connected with the money-laundering syndicates, who provide the cash to buy baby milk powder, vitamins and cosmetics from supermarkets and pharmacies.
Australian Federal Police believes the money launderers have hijacked some of the hundreds of “daigous’’ or surrogate shopper businesses which operate legally in Australia, and are co-mingling the proceeds of crime with the cash needed to buy goods and sending them to China for re-sale.
Federal Agent Dean Chidgey said police were targeting these highly organised and sophisticated money-laundering operations.
“Money laundering is … a key enabler of organised crime and drug trafficking,’’ he said.
“But also in its own right, professional money-laundering organisations generate profits from money-laundering activities by moving proceeds of crime offshore on behalf of transnational serious organised crime groups.’’
The AFP arrested nine people in Melbourne in 2018 and 2019 in two separate moneylaundering investigations. In July last year, three people were charged after police seized $1.8m in cash from a suburban home.
In 2018, six people were charged with offences including money laundering and tobacco smuggling. One has pleaded guilty and been sentenced to nine months’ jail, while five others have indicated they will plead guilty.
Federal Agent Chidgey said the majority of daigou operators ran legitimate businesses and most Chinese tourists, students and residents in Australia, employed as personal shoppers, would not realise they were helping global money launderers move money from the sale of drugs in Australia offshore.
“The interest in baby formula, which sparked many Australian supermarkets to impose a limit on how much could be bought at any one time, was in part because money launderers were trying to clean their drug money,’’ Federal Agent Chidgey said.
“Australian baby formula is highly valued in China. It has provided money launderers with another avenue to use dirty money to buy soughtafter products which can be purchased in Australia and sold overseas, effectively transferring the value of the illicit funds offshore without detection from law enforcement agencies.”
Federal Agent Chidgey said money moved offshore this way did not get deposited into Australian bank accounts and was not able to be tracked by Austrac and other law enforcement agencies. The AFP has teams of money-laundering specialists working in Melbourne and Canberra, with a new team to start in Sydney.
Often working with law enforcement agencies attached to Australia’s Five Eyes intelligence partners – the US, Britain, Canada and New Zealand – police track the activities of drug trafficking gangs and money-laundering syndicates, who work separately but often enter contracts together to move funds offshore.
“That ability to move the money offshore enables drug trafficking organisations to continue the cycle of importing or trafficking drugs into Australia, selling them and generating profit then getting that profit back offshore,’’ Federal Agent Chidgey said.
“Often the heads of the syndicates sit offshore.’’
Police confirmation that baby formula is being stripped from Australian shops as part of a sophisticated criminal enterprise will come as no surprise to Australian shoppers, who for years watched as people bought up trolley-loads of tins in multiple trips.
Efforts by retailers to combat the practice by putting the tins behind the counter or enforcing a two-tin limit failed to dent the activities of the runners. The practice started in 2008 after milk tainted with melamine killed six babies in China and made hundreds of thousands ill, and the growing Chinese middle-class looked offshore for safe formula for their children. The industrialscale buy-up of the formula caused shortages in Australia, with concerned parents in China prepared to pay three times the Australian retail price for milk powder they could trust.
The runners are so organised they would visit multiple supermarkets and pharmacies across a suburb or city, and return multiple times to the same store in an effort to circumvent the two-tin limit.
“We’ve all seen either from our own shopping or through the media that this is still occurring,’’ Federal Agent Chidgey said.
Daigou businesses are estimated to turn over about $1bn a year in Australia but police do not know how much dirty money is laundered through them. Federal Agent Simon Needham said police were tracking the activities of money-laundering syndicate heads across countries around the globe and warned: “Being offshore doesn’t mean you’re out of reach for us.
“We have a very strong and large international network. We aren’t limited to our own jurisdiction — we certainly have tentacles throughout the rest of the world.’’
Federal Agent Needham said investigations that unravelled some of the nation’s most complex money-laundering operations were testament to the dedication of AFP investigators and partner agencies.