Keynote address, 2011 Anti-money laundering and counter-terrorism financing conference

Show me the money: innovative approaches to targeting organised crime

Good morning.

Let me begin by expressing my respect to the Traditional Custodians of the land on which this conference takes place.

I am pleased to be here today as a co-host of this very important conference which brings together experts from around the world to share their experience in combating money laundering. 

I want to start with the obvious. We know that organised crime is all about money.  The motivator for taking the extreme risks, breaking the law and causing destruction and harm to others, is greed and wealth. 

And there are significant profits to be made.  Revenue from cocaine trafficking in Australia can generate mark-ups in the vicinity of 8000 per cent.

However, criminals don’t want their sudden wealth to attract the attention of authorities when they wish to use that money. They need the money to lose its criminal connection and appear legitimate.

Non-traditional sectors

Imagine for a moment, that you are an entrepreneurial criminal, and you need to find a way to ‘clean’ the profits from your illicit trade in drugs or counterfeit goods. 

You might first think to transfer your ill-gotten gains to a foreign tax haven, to hide the funds from law enforcement. 

But law enforcement and regulatory agencies know a lot about these havens today.  We actively monitor cash flows to and from these countries, and we work with international partners to identify, seize and prosecute. 

So these havens don’t look so attractive any more… where to now? 

The answer: You look anywhere there is money to be found. 

Traditionally we’ve looked at the finance sector — banks, stock markets and any market that deals in financial products. 

But if we really think about it, is there any sector that isn’t vulnerable to money laundering?

The total annual income[1] for some of Australia’s diverse industries presents an interesting picture:

• Agriculture, Forestry and Fishing : more than $64 billion
• Construction : more than $280 billion
• Private sector education and training: more than $27 billion
• Rental, hiring and real estate services: more than $97 billion.

There are vast sums of money passing through thousands of small, medium and large enterprise — and through the delivery of government services — on a daily basis.  And each of these sectors is vulnerable to exploitation by organised crime. 

It is our job, as legitimate business, and regulatory and law enforcement agencies, to stay one step ahead of the criminals and identify potential vulnerabilities before it is too late.

So, just like Tom Cruise’s character famously yelled down the phone inJerry Maguire, each day I ask my analysts and investigators at the Australian Crime Commission to “show me the money!” 

I don’t want us to be constrained in where we look for organised criminal activity — because there is no chance that the criminals are sticking to the rule book.

Case studies

To illustrate my point, let me give you an example of a money laundering case that the Australian Crime Commission and our partners exposed earlier this year.

In February, two women — aged 47 and 59 — were charged with running a tax avoidance syndicate on behalf of a number of clothing manufacturers.  

The scheme allowed a number of clothing businesses to siphon legitimate company funds through a series of ‘shell companies’ to hide their true income. And you thought the fashion stakes at the Melbourne Cup were high!

But this is not an isolated example.  Just as you hear about the many ways a drug trafficker will seek to hide their illicit commodity in everything from car parts to seafood — and yes, the Crime Commission was involved in catching that fishy criminal as well — you can bet that a money launderer can invent a new way to disguise and move money.

In a recent international case, the managers of a Czech energy company attempted to orchestrate an illegal takeover by diverting the company’s own assets[2].

The prosecutors allege that the managers set up complex business structures in different countries to misappropriate the company's assets, which they then used to buy-out the company.

Over 100 bank accounts were linked to these activities, and approximately USD $680 million has been seized as a precautionary measure.

Quite an innovative way to launder money and create wealth for one’s self.

How do we follow the money

So now that we have opened up our thinking beyond the traditional finance sector, how do we go about identifying vulnerabilities and disrupting money laundering activities?

There are two key initiatives that the Australian Crime Commission, in conjunction with our partners, has implemented to specifically follow the money.

High risk funds methodology

The first of these is the high risk funds methodology, which focuses on the movement of money.

This method shares some commonality with economic analysis and treats money as a commodity independent of criminality.

By analysing data on offshore money movements, we can identify anomalies, which might indicate illicit funds.

This is where our partnerships with agencies such as AUSTRAC, and the private sector come in, and the benefits are very tangible:

• we can identify more opportunities to confiscate illicit funds
• law enforcement efforts can be better targeted to disrupt criminal enterprise, and
• we have an enhanced strategic intelligence picture to informs long term prevention strategies.

Fusion

The second initiative that I alluded to is the National Criminal Intelligence Fusion Capability. 

Fusion builds on the high risk funds methodology by drawing on a much wider data set available across government agencies, such as the Australian Federal Police, the Australian Taxation Office, Australian Customs and Border Protection, Australian Securities and Investments Commission, Centrelink and the Department of Immigration and Citizenship.

The Fusion capability was launched in July 2010, and has already identified 59 organised criminal targets that were previously unknown to law enforcement.  Several of these targets have been identified as laundering suspected criminal proceeds in excess of $100 million annually.

Collectively, we are thinking outside the box and considering sectors that aren’t traditionally associated with organised crime.

For example, the Department of Sustainability, Environment, Water, Populations and Communities recently sought our assistance in relation to illegal international trafficking of endangered species.  Fusion is helping understand a more complete picture of the syndicate involved; its international links and its methodologies, including counterfeit document production and money laundering.

When you think about the large volumes of money involved in Australian sport — the high wages and amounts gambled — the vulnerabilities in this sector also become clear. In June this year, we provided Australia’s Sport Ministers with an intelligence overview of the risks and vulnerabilities in the Australian professional sporting sector. This informed the development of a National Policy on Match-Fixing in Sport which was subsequently agreed to by the sports ministers on behalf of their respective governments.

But Fusion is not without its boundaries.  There are very strict legislative constraints around the sharing of information, particularly with partners that are not traditionally part of the law enforcement response.  While our intent is to be open and transparent, there is clearly some work to be done to allow true information sharing.

It is critical that we find the right balance between protecting people’s privacy and personal business, without providing an impenetrable cover for organised criminals to hide profits. Ironically it is the criminals that grossly breach the privacy of their victims.

Information sharing with industry and public

The Australian Crime Commission makes a concerted effort to share as much information as possible with industry and the general public.  This is challenging as much of our intelligence is classified, and to reveal its contents can provide criminals with an advantage.

But we recognise that the risk is sometimes worth the reward.

Take for example the 2010 National Card Skimming Task Force, comprised of law enforcement agencies across jurisdictions, which disrupted a criminal syndicate that was stealing money from Australian’s savings accounts.  Within months, the task force had all but dried up the opportunities — protecting the Australian community from projected losses of around $98 million. 

A key tenet of this task force was engagement with industry—including the Australian Payments Clearing Association, the Australian Retailers Association and the Australian Bankers Association—and specialist analysts from major banks who provided their expertise.

And right now we are partnering with an even larger group of stakeholders to combat what might be the most significant organised investment fraud activity in Australia’s history. 

The scope of partners for this task force reflects the scope of this investment fraud activity, which targets the savings of those nearing retirement and has already touched more than 2400 Australians, and caused losses in excess of $93 million. 

The Department of Human Services and the Australian Competition and Consumer Commission are involved with the task force, along with more than 24 industry bodies from the superannuation sector, banks and financial institutions, community associations, internet service providers, and more. 

I believe that this task force will forge even stronger ties with industry which will provide us with opportunities for preventing organised criminal activity in the future.

Prevention focus

I think we can all agree that prevention is better than cure.  While arrests and seizures dominate the media headlines, it is the risk mitigation, industry engagement, policy and regulatory responses that make the most impact.

We would much rather make Australia a hostile place for organised criminals to do business than catch them after they have already carried out the crime.

The recent introduction of a legislative bill that aims to enhance AUSTRAC’s capacity to supervise the remittance sector is one example of a prevention effort. We know that organised crime uses alternative remittance dealers to get money offshore and laundered, and we support the powers that this bill will provide to AUSTRAC.

It is not about ‘locking up’ remitters, but about education and awareness, and AUSTRAC sanctioning those who don’t comply with the legislation.

We are concurrently developing a strategic intelligence report with AUSTRAC and the Australian Federal Police that looks over the past 10 years to determine the size and types of risks confronting the alternate remittance sector.

In addition, our Board this year established a determination that allows the ACC to use its special powers to gather intelligence to identify policy and regulatory responses that will harden Australia’s institutions, industries and economy.

This determination is aptly named Making Australia Hostile to Serious and Organised Crime and has the auspices of a special operation. 

While it is unlikely that you will read about this work on the front page of the national news papers, I can honestly say that I am looking forward to reporting on its progress in the years to come.

Individual members of the public also play a part in creating a hostile environment for organised criminality when they are armed with the right information. 

In April we released the most comprehensive unclassified picture on the threat and risk of organised criminality in Australia that we have ever produced.  Organised Crime in Australia 2011 is available on our website, and I have included a copy in your conference satchels.

We also created a set of easy to read and simple fact sheets and some animations that cover a variety of crime themes and their impact. 

Today, I am pleased to launch the latest educational animation in this series — one that seeks to explain the concept of money laundering in a way that is accessible to the general public. 

While I don’t propose that members of this audience would learn much from this simple animation, it will help others to understand the nature of money laundering and some of the vulnerabilities that can exist. 

I would encourage you to view this animation on our website and refer to it as an educational tool in as many different forums as you think relevant.

Conclusion

Which brings me to my final point, and back to my first.  The relevance of money laundering risks to a number of non-traditional sectors can’t be underestimated.

All of us in this room are collectively and singularly responsible for creating an environment that discourages money laundering activity. 

It is the relationships that we build across industry and government, through conferences such as this, that will help us to achieve this goal into the future.

It is no longer enough to just ‘show me the money’. 

I now want you to see the money in your own sector, and think about the vulnerabilities and how you can best mitigate them. Whether that is through education, regulation, improved processes and business practices, or policy change.

Together we can help create an environment that is ‘too hard’ for organised criminals to conduct their business.

Thank you.

ENDS