Money Laundering in and through Australia, 2004

Article excerpt

By its nature, money laundering is unlikely ever to be measured accurately, but estimates of its cost to the economy can be made using a range of data sources. This research updates estimates of the cost of money laundering undertaken in 1995 and identifies risk areas for money laundering in and through Australia. It confirms that fraud constitutes the greatest source of laundered funds, followed by the illegal drug trade. The sectors that survey respondents identified as most likely to be utilised to launder money were banking, casinos, real estate and accounting. The mechanisms identified as most commonly used to launder money were cash and wire transfers, credit cards and 'payable through' accounts. There was also occasional use of gold and precious metals, and cheques. The respondents identified real estate, further criminal activities, gambling, luxury goods and legitimate business as the most likely activities in which the laundered money was invested. Taking several different methods of estimating losses from money laundering into account, the total estimate for 2004 was $4.5b. While Australia's mature controls over national and international financial transactions place it at the lower end of the range of costs, the changing international financial environment and increasing sophistication of offenders mean that opportunities for new ways of money laundering continue to develop. Its potential to fund terrorist activities makes its identification and control even more pressing.

Toni Makkai

Director

The 1995 report, Estimates of the extent of money laundering in and through Australia (Walker 1 995) suggested that around $3. 5b per annum were believed to be generated by crime in Australia and laundered either in Australia or elsewhere, with the bulk generated by fraud and then drugs. This went against the prevailing international consensus, which was that the majority of laundered money was generated by drug offences. Since then, however, research around the world has increasingly identified fraud as the predominant international generator of criminal profits (compare, for example, the ACFE (2006) estimate of US$638b for fraud with the ONDCP (2003) estimate of US$64.8b on drugs).

A number of issues, such as the changing nature of crime, the factors that facilitate crime such as technology, the rise of terrorism, and the passage of time, presented the opportunity and need to revisit the earlier work, to assess whether Australia's response to money laundering more than a decade on continued to be effective and commensurate with the seriousness of the problem. It was also an opportunity to extend the analysis of the extent of money laundering to an assessment of the linkages of crime and money laundering in the Asia Pacific region, and to terrorism in the region.

Worldwide concerns over the extent of money laundering, coupled with evidence that major terrorist activities have been facilitated by money laundering techniques, have significantly increased the level of knowledge and interest in money laundering. Understanding money laundering demands analysis of the size of the problem and its impacts on society. However, few real advances have been made in the quantification of money laundering at the regional or global levels. There is much reliance on former International Monetary Fund Managing Director Michel Camdessus' frequently quoted estimate of two to five percent of global GDP (Camdessus 1988), but there is little evidence of the basis of this estimate.

Apportioned to Australia these top-down estimates, would equate to about $10.9 to $27. 3b in 1995 terms, far in excess of the Walker estimation of $3. 5b (using 2002-03 figures, the Camdessus estimate would suggest a range of $14.7-36.7b). This shortfall suggests that Australia's relatively robust financial sector, the investment made in law enforcement and financial intelligence, and the nature of Australia's borders and stability have contributed to a lower than global average extent of laundering. …