Aussie banks laundered AU $500m for cocaine cartels
Australian banks washed AU$500 million (FJ$787m) for violent South American cocaine cartels in a sophisticated money-laundering scheme with the proceeds of crime moving through multiple countries before it was disrupted by Australian law enforcement.
Between 2014 and 2017 more than AU$100m (FJ$157m) in drug money was funnelled through Australian banks each year before it was routed to other destinations including South East Asia and the Middle East.
Once in Australia, illegal profits from the drug trade were often used to buy high-end electronics that were shipped overseas in containers in order to move the funds without being detected and to further disguise its origin.
Discovery of the criminal network
The criminal network was discovered when law enforcement bodies noticed the valuations on the invoices being used by the exporters and importers didn’t match, a technique used by criminals to transfer funds known as trade-based money laundering.
The syndicate was referred to Australian Border Force (ABF), which deployed the Border Related Financial Crimes Unit to take down the network.
The role of the unit is to disrupt illicit financial flows and it was assisted
by domestic and international partner agencies including Australia’s financial intelligence regulator, AUSTRAC.
At least 16 domestic and international financial institutions became unwitting conduits for drug cartels, the ABF said, declining to identify the banks or drug cartels for reasons of operational security.
“Through the course of the investigation, ABF identified nine Australian financial institutions and seven international financial institutions that were unknowingly facilitating various banking and loan accounts for the suspect entities involved in the case.”
The ABF said traffickers used a number of techniques including “placement” or introducing the funds to the banking system, “layering”, or a series of cross-border transactions used to buy goods and disguise the origin of the funds, and “integration” in which the goods are sold and profits legitimised.
In this instance, the funds’ sources were some of the most violent criminal enterprises on the planet.
“The trade in cocaine from South America was identified by the referring agency as the source of illicit funds cleaned by the money laundering processes,” the ABF spokeswoman said.
The drugs were sold in North America and funds were transmitted to bank accounts in South East Asia before they were layered through a multitude of Australian bank accounts.
“In the case study, the predominant commodities used to transfer value were electronic devices that included smartphones, smart watches, digital cameras, laptops, gaming consoles, and other personal electronic devices,” the ABF said.
Invoices of the shipments sent overseas were deliberately undervalued.
Once the goods arrived at their destination they were sold for their proper face value allowing offshore collaborators to collect the profits.
Detecting such examples of “trade misinvoicing” is a considerable challenge for customs agencies.
Money laundering has come a long way since the 1920s when Chicago mobster Al Capone tried to legitimise criminal profits by mixing them with revenue from a chain of laundromats, AUSTRAC says.
Criminal syndicates are increasingly using trade-based money laundering which sees illegal profits used to buy goods which are shipped overseas to transfer value to themselves or third parties.
“Trade based money laundering is complex in nature, and in this matter the investigation involved sharing financial and criminal intelligence between domestic and international government agencies to dismantle this criminal network,” AUSTRAC said in a statement.
Financial intelligence units
An international group of 166 financial intelligence units known as the Egmont Group said in a report last month that the materials, machinery, scrap metal, fuel, energy and beverages industries were among those most likely to be exploited.
The profits of international organised crime have been estimated at 1.5 per cent of GDP and the IMF has estimated about US$4 trillion (AU$5.2 trillion) (FJ$8.18tr) is laundered every year.
AUSTRAC says crooks manipulate invoices in order to transfer the proceeds of crime or pay for illegal goods. This may extend to issuing multiple invoices for the same shipment or sending no goods at all in what are known as “ghost shipments”.The once low-profile financial intelligence regulator hit the headlines in 2017 with allegations Commonwealth Bank broke the law tens of thousands of times and captured the public’s interest again with claims Westpac notched up almost 20 million breaches two years later.
More recently AUSTRAC hit a patch of turbulence after it was forced to recant claims the Catholic Church transferred almost AU$2 billion (FJ$3bn) to Australia.
AUSTRAC confessed the figure was actually AU$9.5m (FJ$14.96m) and had been inflated many times over by a computer coding error.