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Reports highlight risks of money laundering and terrorism financing

Media Release

10 February 2012

THE HON NICOLA ROXON MP
ATTORNEY-GENERAL

THE HON JASON CLARE MP
MINISTER FOR HOME AFFAIRS
MINISTER FOR JUSTICE

Attorney General Nicola Roxon and Minister for Home Affairs and Minister for Justice Jason Clare today released three reports highlighting the risks to Australian business and non-profit organisations of money laundering and terrorism funding.

The reports were prepared by the Australian Institute of Criminology and include:

  • Money laundering and terrorism financing risks to Australian non-profit organisations;
  • Trade Based Money Laundering: Risks and regulatory responses; and
  • Anti-money laundering and counter-terrorism financing across the globe: A comparative study of regulatory action.

“Australia has some of the strongest measures in place to combat money laundering and terrorism financing,” Ms Roxon said.

“But, there is still more work to do and combating money laundering and starving terrorists of funds will continue to be a priority for our agencies.”

Mr Clare said that these reports would help educate business and non-profit organisations about the risk of money laundering.

“These reports identify the ways that business and non-profit organisations can be targeted by organised crime to launder money,” Mr Clare said.

“By highlighting the risks, business and non-profit organisations are armed with the information they need to protect themselves against criminals.”

The reports were prepared as part of a $3.2 million program of research into money laundering and financing of terrorism in Australia.

Media enquiries:
Attorney-General’s office: Chris Owens – 0409 945 476
Minister Clare’s office: Korena Flanagan – 0418 251 316

Money laundering and terrorism financing risks to Australian non-profit organisations:

This reportexamines the vulnerabilities of charities and other non-profit organisations (NPOs) to money laundering (ML) and financing of terrorism (TF).

Australia’s third sector is estimated to encompass around 600,000 organisations with almost three quarters (440,000) of these organisations being small and unincorporated.

It is estimated to be worth $14.6 billion and employs around 900,000 employees and receives volunteering services from about 4.6 million people.

The report found that smaller, local, community-based NPOs, especially informal ethnic and faith-based charities, often fall outside regulatory scrutiny and could be especially vulnerable to money laundering and terrorism financing.

This is particularly the case for organisations that regularly use informal methods of funds transfer - such as alternative remittance services.

Many small NPOs lack familiarity with these issues and need training in how to identify clients and transactions that pose risks of criminality.

Larger Australian charities and other organisations are also vulnerable to misuse, particularly if they collect and distribute donations from the public.

The report found that organisations that have overseas offices in less-regulated countries, their structure may make them more vulnerable than their size suggests.

  • The report identified that 41 percent of 291 NPOs surveyed did not have a documented risk-management policy in place.
  • In another survey, only 29 percent of the 272 respondent organisations had implemented a fraud control policy.
  • The Australian Government has produced guidelines to educate the non-profit sector on best practice to reduce risks of this nature.
  • In the 2011–12 Federal Budget, the Australian Government announced the establishment of an Australian Charities and Not-for-Profits Commission, which would be important in coordinating the regulation of the sector so as to minimise risks of fraud and abuse.

After 9/11 the Financial Action Task Force (FATF) moved to tighten regulations around NPOs by advocating increased transparency within the non-profit sector and the implementation of a regulatory scheme that included sector outreach, sector monitoring and effective intelligence and information gathering.

Trade Based Money Laundering: Risks and regulatory responses:

This report examined the fraudulent use of goods and services to inflate trade costs and launder money for other purposes.

This includes:

  • over- and under-invoicing for goods and services;
  • multiple invoicing of goods and services;
  • over- and under-shipments of goods and services; and
  • falsely described goods and services.

It identifies the internet as a new risk, where virtual trade and online gaming will provide new avenues for money laundering.

The paper finds this area of money laundering is less well understood, and requires further research to inform regulatory laws, and awareness raising across the trading sector. 

Anti-money laundering and counter-terrorism financing across the globe: A comparative study of regulatory action:

This report compares the anti-money laundering and counter terrorism financing regulatory regimes of nine countries including Australia.

It compares France, Germany, Belgium, the United Kingdom, the United States, Singapore, Hong Kong and Taiwan with Australia in terms of anti-money laundering and counter terrorism financing legislation and court decisions, regulation and compliance, and enforcement and prosecution outcomes of money laundering and financing of terrorism offences.

The report shows that Australia has a tough regulatory regime.

It is the only country of the nine that requires all regulated entities to report all international electronic funds transfers regardless of value.

With respect to compliance with AML/CTF laws, all countries have shown large increases in reporting suspicious transactions – more than a 300% increase between 2002-03 and 2008-09 in both the United Kingdom and the United States.

In Australia, the number of prosecutions for money laundering has been relatively low compared with other countries considered in this report, although prosecutions have increased considerably from five charges in 2003–04 to over 100 in 2010-11.