Money launderers are using more sophisticated methods to remain one step ahead of law enforcement, says one expert — so how do countries stop them?
What is money laundering?
- Disguising original ownership and control of proceeds of crime by making it appear to have come from a legitimate source
- The three stages of laundering money are first introducing dirty money into a financial system, washing it, and finally reintroducing it back into the legitimate economy
Allegations that the Commonwealth Bank breached anti-money laundering laws on almost 54,000 occasions have raised concerns that Australia’s financial system is exposed to criminal elements, including the likes of drug runners.
While the extent of the alleged breaches shocked the CBA and regulators, a former US Treasury official and undercover intelligence agent said he was not surprised.
John Cassara has come face-to-face with money launderers over a 26-year career, and he warned that both the US and Australia were losing the battle in enforcing money laundering laws.
Mr Cassara said the recent case of the Commonwealth Bank just proved how exposed Australia was to sophisticated money laundering gangs.
“[That] case is kind of like a microcosm of some of the challenges that we face combatting money laundering around the world,” Mr Cassara said.
“The allegations that the CBA was compromised simply demonstrated the vulnerabilities of the current financial system.
“I don’t think most people understand how very large the scale of money laundering is.”
Mr Cassara cited International Monetary Fund estimates that worldwide money laundering is 2 to 5 per cent of global GDP, which very roughly translates to about US$5 trillion a year.
“And it’s probably a lot higher than that,” Mr Cassara said.
He said tax evasion could also potentially be considered a form of money laundering, and would add trillions of dollars to the IMF’s estimate.
Mr Cassara said Australia, like many other modern developed countries, faces similar challenges to the US.
Some of those challenges include underground financial systems, trade-based money laundering, cyber and new payment methods — all of which are already found in both Australia and the US.
“Some countries do better than others, the United States does pretty well, Australia is getting a lot better — certainly better than they were say 10 years ago,” he said.
“I mean, to be a money launderer today you have to be either very, very stupid or very unlucky to get caught.”
Looking into the future and challenges faced by countries trying to reign in money launderers, Mr Cassara said what is being done right now “just isn’t working”.
“I can say that with certainty from the US perspective. If you look at the numbers, they’re not good. And I think that holds true for Australia as well.”
With ‘unlimited resources’, how do you stop them?
Just how sophisticated are money launderers? Extremely so, Mr Cassara said, and they are equipped with “almost unlimited resources”.
“That’s something that governments, law enforcement, intelligence agencies, customer services — they do not have that,” he said.
Money launderers are able to use state-of-the-art techniques and hire the best and the brightest in the business, including lawyers, and accountants.
But Mr Cassara said in the end, “old-fashioned” ways of moving money, such as bulk cash smuggling, continue to be extremely difficult to detect.
“Basically the smuggling of drug proceeds — somewhere between $20-$40 billion a year is probably moved across the southern US border into Mexico,” he said.
‘Laws aren’t the problem, we need more enforcement’
Post 9/11, Mr Cassara said countries around the world put in place robust money laundering and counter-terrorism finance regimes.
But in the fight against money launderers, the problem is not with the laws, rules and regulations, but with enforcement.
Mr Cassara said current money laundering systems in place were constantly exposed to potential failure, which is why more regulation in certain industries is necessary.
“I know that in the United States and Australia there’s been a lot of talk about, for example, real estate agents should be reporting — [and] attorneys, accountants, this type of thing,” he said.
“There are always things that we need to do. But where we’ve fallen down is lack of law enforcement.”
A perceived loophole in Australian law means lawyers, accountants and real estate agents do not have to declare anything over $10,000.
Australia’s anti-money laundering law in fact does not cover those industries, despite promises when the law was enacted in 2006 the legislation would be widened.
Mr Cassara said it was essential for such designated professionals to be made to adhere to anti-money laundering guidelines.
“Unfortunately this is taking a lot of time, there’s a lot of pushback from the industry, there’s a lot of lobbying going on,” he said.
“Eventually it will happen, but I just hope it’s sooner rather than later.”