Australia’s approach to

combating money
laundering

William Morris
Assistant Director
Department of Home Affairs
Department of Home Affairs William.Morris@homeaffairs.gov.au
 Hypothetical Case Scenario
• A Commonwealth public official is living a lifestyle that
cannot be explained by his legitimate sources of income.

– He purchased 5 sports cars and 3 houses, valued at

$15 million, in a one year period. His annual salary is
only $90,000.

• An investigation reveals that the official received funds from:

– anonymous cash payments over $10,000 not reported

by his financial institution

– payments from Australian bank accounts with false

names, and

– payments from overseas shelf companies with ‘dummy

directors’.

• Evidence suggests that these payments constituted bribes

but tracing efforts to verify this have been frustrated by
non-cooperative overseas financial institutions.

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What can Australian authorities do?
• Prosecute money laundering offences (sections 400.3-400.8
Criminal Code Act 1995).
• Prosecute unexplained wealth offences (section 400.9 Criminal
Code Act 1995).
• Confiscate property or benefits linked to money laundering or
unexplained wealth (Proceeds of Crime Act 2002).
• Take enforcement action against regulated entities under the
Anti-Money Laundering and Counter-Terrorism Financing Act 2006.

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 Money laundering offences
1. The person must intentionally ‘deal with’ money/property, and
2. The money/property must actually be ‘proceeds of crime’ and the person
must
– believe that the money/property was ‘proceeds of crime’ or
– be reckless as to whether the money/property was ‘proceeds of crime’,
and/or
– be negligent as to whether the money/property was ‘proceeds of
crime’, or
2. The person must:
– intend that the money/property will become an ‘instrument of crime’ or
– be reckless as to an actual risk that money/property will become an
‘instrument of crime’, and/or
– be negligent as to an actual risk that the money/property will become
an ‘instrument of crime’.

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 Matrix of offences
Section Value Intent/ Recklessness Negligent
belief
400.3 $1,000,000 25 years 12 years 5 years

400.4 $100,000 20 years 10 years 4 years

400.5 $50,000 15 years 7 years 3 years

400.6 $10,000 10 years 5 years 2 years

400.7 $1,000 5 years 2 years 12 months

400.8 Any value 12 months 6 months 10 penalty

units

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400.2 Dealing with money/property
(1) For the purposes of this Division, a person deals with money or
other property if:
(a) the person does any of the following
i. receives, possesses, conceals or disposes of money/property;
ii. imports money or other property into, or exports money/property
from, Australia;
iii. engages in a banking transaction relating to money/property.

Controllers of money laundering networks can be found liable for

dealing with property/money through proxies (see ss 11.1 and 11.3
of the Criminal Code Act 1995).

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Proceeds of crime – Definitions
"proceeds of crime" means any money or other property that is wholly or
partly derived or realised, directly or indirectly, by any person from the
commission of an offence against a law of the Commonwealth, a State, a
Territory or a foreign country that may be dealt with as an indictable offence
(even if it may, in some circumstances, be dealt with as a summary
offence). (section 400.1)
"foreign indictable offence" means an offence against a law of a foreign
country constituted by conduct that, if it had occurred in Australia, would
have constituted an offence against:
(a) a law of the Commonwealth; or
(b) a law of a State or Territory connected with the offence;
that may be dealt with as an indictable offence (even if it may, in some
circumstances, be dealt with as a summary offence). (section 400.1)
It is not necessary for the prosecution to prove that in relation to money or
property that is proceeds of crime, that: a particular offence was committed
or a particular person committed it (section 400.13(1)).

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Proceeds of crime – elements of offence
• Must prove that money/property was actually derived or realised
from a ‘class’ of indictable offence that, if committed in Australia,
would constitute an offence under Australian law.
• A person must also believe, be reckless or negligent as to whether
money/property was derived or realised from a particular ‘class of
offence’, which can be the same or different to the class mentioned
above.

Example – The offence will be satisfied where a person intentionally

deals with property, the property actually comes from a bribery offence
and the person believes it comes from a fraud offence.

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Hypothetical Case Scenario
• A money laundering prosecution is unlikely to be successful:
– the public official intentionally dealt with the money in his bank
account, as well as his 3 houses and 5 sports cars, in that he
received and possessed this property/money, but
– authorities do not have enough evidence to prove, beyond
reasonable doubt, that this property/money was actually derived
or realised from ‘bribery’.

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 Unexplained wealth offences (s 400.9)
1. The person must intentionally deal with money/property, and
2. It must be reasonable to suspect that the money/property was
proceeds of crime, which will be deemed to be the case if:
– transactions are structured below $10,000 to avoid reporting
obligations
– one or more false bank accounts are used, or
– the value of the money/property involved in the conduct is grossly
out of proportion to the defendant’s income and expenditure over a
reasonable period within which the conduct occurs.
Maximum penalty – 2 years imprisonment and/or a fine of $25,200 where
the property/money dealt with was under $100,000
Maximum penalty – 3 years and/or a fine of $37,800 where the
property/money dealt with was over $100,000.

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Section 400.9 – Defence
• It is a defence to the section if the defendant proves he or she had
no reasonable grounds to suspect that money/property was derived
or realised, directly or indirectly, from some form of unlawful activity
[section 400.9(5)]

Must be proven to a legal standard of proof, meaning that it is more

likely than not that this was the case.

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Hypothetical Case Scenario
• A section 400.9 prosecution is likely to be successful as:
– the public official intentionally dealt with the money in his bank
account, as well as his 3 houses and 5 sports cars, in that he
received and possessed this property
– one or more false bank accounts were used
– the value of the property purchased by the official ($15 million) is
grossly disproportionate to the official’s income during the one
year period ($90,000), and
– the public official cannot prove that it is more likely than not that
there was a legitimate source of income to explain these
purchases.

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Asset confiscation
• Proceeds of Crime Act 2002
• Criminal asset confiscation involves three steps:
– Covert investigation
– Restraint of property (on a ‘reasonable suspicion’), and
– Confiscation of property or its value (on the ‘balance of
probabilities’).
• This is much easier to achieve than a prosecution as:
– there is a lower standard of proof
– a person does not need to be convicted of a crime
– you do not need to identify the criminal (asset-directed forfeiture)
– you do not need to find the property (pecuniary penalty orders).

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Hypothetical Case Scenario
• Asset confiscation is likely to be successful, as authorities would
use our unexplained wealth offence as a predicate offence.
• In essence, the houses and sports cars were proceeds of ‘dealing
with money reasonably suspected of being proceeds of crime’.
• If the public official disposes of this property before confiscation
action can be taken, authorities would obtain a pecuniary penalty
order requiring the person to pay the value of this property ($15
million) to the Commonwealth.

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AML/CTF Regulation
• Anti-Money Laundering and Counter-Terrorism Financing Act 2006
• Regulated entities include financial service providers, gambling
service providers, bullion service providers and cryptocurrency
exchanges.
• Regulated entities must enrol, have an AML/CTF program, report
suspicious matters and certain transactions and identify their
customers.
Challenges
• Regulatory gaps (real estate agents, lawyers, accountants, trust and
company service providers, high-value dealers).
• Future proofing to address emerging methodologies.
• Balancing regulatory, education and intelligence functions.
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Hypothetical Case Scenario
• Financial institutions are regulated and have:
– failed to report cash transactions over $10,000 to AUSTRAC
– not verified the identity of their customers, and
– likely failed to report a number of suspicious matters.
• Each infraction can attract a civil penalty of up to $4.2 million (for an
individual) and $21 million (for a corporation).

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Commonwealth Bank of Australia
• CBA did not comply with its own AML/CTF program, as it did not carry
out any assessment of the risks posed by Intelligent Deposit Machines
(IDMs) before their rollout.
• For a period of three years, CBA did not comply with the requirements
of its program relating to monitoring transactions on 778,370 accounts.
• CBA failed to give 53,506 threshold transaction reports to AUSTRAC on
time for cash transactions of $10,000 or more through IDMs.
• CBA failed to report suspicious matters either on time or at all involving
transactions totalling over $77 million.
• Even after CBA became aware of suspected money laundering or
structuring on CBA accounts, it did not monitor its customers to mitigate
and manage ML/TF risk.

Result: Settlement for $700 million penalty.

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Questions?

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