Two new extensive national risk assessments on money laundering and terrorism financing have been produced by AUSTRAC. These assessments provide a collective understanding of the scale, sophistication and threat financial crime and criminal activity in Australia.
In one report, AUSTRAC has explained how money laundering is a fundamental enabler of virtually all serious crime by enabling criminals to reinvest their illicit profits into further crime.
“Crimes like money laundering and terrorism financing erode trust in Australia’s financial system and the security of the Australian population. Criminals might be persistent, but so are we,” AUSTRAC chief executive officer, Brendan Thomas said.
“That’s why AUSTRAC has worked with the national intelligence community, law enforcement and regulatory agencies, together with industry and international financial intelligence units to build these risk assessments.
“These [National Risk Assessments] will help strengthen Australia’s anti-money laundering and counter terrorism financing regime, which is a key component of the national, cooperative approach to countering serious and organised crime,” Thomas said.
Technological advancements over the past decade have further complicated the ability to detect and track illicit transactions. The speed of some payment systems enable value to be transferred almost instantaneously, across national and international borders, and in some cases outside regulatory capture, AUSTRAC stated.
Artificial intelligence and the widespread access to it will almost certainly create further and more complex challenges for reporting entities and authorities, for example by challenging identity verification processes.
Nevertheless, AUSTRAC's national risk assessment on money laundering in Australia found that despite the emergence of new channels emerging, criminals still prefer to conduct their operations via traditional methods using cash, banks, luxury goods, real estate and casinos.
"Banks continue to be a reliable and efficient way to move funds nationally and globally by threat actors," AUSTRAC's risk assessment has indicated.
And here, the major banks are almost certainly exposed to the majority of terrorism financing risk facing the sector given the size of their customer base, scale of operations, cash transaction infrastructure and global reach.
"However, major banks invest heavily in their AML/CTF capabilities, have a strong understanding of their terrorism financing risk exposure, and implement sophisticated monitoring systems," reported AUSTRAC.
They also detect and report more suspicious transactions than any other banking subsector, providing significant amounts of financial intelligence to law enforcement and intelligence bodies.
The cash tracing agency has observed that for a customer getting de-banked by a major bank, terrorism financing risk can be displaced to a smaller bank which may employ less regulatory and compliance oversight.
Further, terrorism financing risk is concentrated in retail banking, which is exposed to high volumes of low-value transactions. Transaction accounts and electronic funds transfers are particularly attractive for terrorism financing as they allow rapid, reliable and easy collection, storage and movement of funds nationally and globally.
“We know, through the good work of our colleagues in the Australian Criminal Intelligence Commission, that the value of the domestic Australian drug market is worth at least $12.4 billion dollars per year,” said Thomas.
“This money then needs to be laundered through the Australian economy, every single year.
“And that’s only one type of crime driven by Australian organised crime groups. The exploitation of digital currencies is increasing. This helps criminals move funds quickly, cheaply and with what they perceive as a degree of anonymity,” he added.
The second NRA released covers terrorism financing in Australia. AUSTRAC's research and inter-agency consultation found that retail banking, remittance and exchanging cash remain the preferred avenues to move funds.
Most of these illicit funds go to overseas terrorist organisations and affiliated groups. Social media and crowdfunding platforms are also becoming integral to fundraising terrorist activities.
AUSTRAC CEO Brendan Thomas said the risk assessments will help businesses understand the methods that criminals use to launder proceeds of crime or fund extremist violence.
He also said the money laundering risk assessment identifies sectors that are highly vulnerable to criminal exploitation but not covered by the current AML/CTF framework.
“We know there are particular sectors that pose money laundering and terrorism financing risks and are consistently exploited – knowingly and unknowingly – by transnational, serious and organised crime groups to disguise and launder criminal wealth,” he said.
The Australian Government has proposed reforms to simplify Australia’s AML/CTF framework and extend it to higher risk services, including professional services provided by lawyers, accountants and real estate agents.
“These businesses are uniquely positioned to provide insights into suspicious behaviour through the services they provide. Reports from these businesses will help build a more complete picture of money laundering activities that assist law enforcement activities in combatting serious and organised crime from child sexual exploitation to scams," Thomas said.
This insight has been severely limited, however. On AUSTRAC's side, since 2001 some 22 individuals have been convicted of terrorism financing offences in Australia.
"As at September 2023, one terrorism financing matter was before the courts. These offences primarily relate to funds supporting a terrorist organisation abroad or a foreign fighter. This is broadly consistent with the dominant characteristic of Australian terrorism financing, which mostly involves funds flows going overseas as opposed to use onshore."
Australia’s terrorism financing environment is predominantly characterised by small-scale outgoing international funds flows, and is influenced by offshore events, conflicts and geopolitical tensions.
"Domestic attacks are very infrequent and are mainly committed by lone actors who self-fund their activities and often lack a financial element," AUSTRAC has reported
"When financing is evident, it usually involves the direct provision of a weapon or small amounts of cash. Domestic fundraising in support of individual terrorists or violent extremists does occur, but this often involves raising funds to assist with legal fees or other legitimate costs. These financing activities are not illegal."