- 1. Introduction
Before we discuss the impact of the system of suspicious transaction reporting, it will be helpful if we examine what sort of phenomenon it is and how much of it there is believed to be in existence, and what sort of role it could be expected to play in the detection and prosecution of crime. Like many terms in political and media discourse, “money-laundering” is used in very different ways. In the past, somewhat less emotive terms such as “the black economy”, the “informal economy”, or “hot money” were used, often to refer to undeclared legitimate earnings i.e. cash money skimmed off from legitimate businesses for the purposes of evading tax. Money laundering is undertaken for two principal purposes. Firstly, insofar as unlaundered property or money may have evidentiary value in relation to establishing the commission of a substantive offence, the laundering is aimed at reducing the likelihood of prosecution for that offence. Secondly, and usually more importantly, the process involves conversion processes, often intricate and elaborate, designed to make it appear that the property has a legitimate source and hence represents neither forfeitable tainted property nor proceeds. This latter point was vividly made in a comment attributed to Bruce (Snapper) Cornwall, who was sentenced to 23 years imprisonment and subsequently had significant property confiscated when he allegedly said “I don’t give a f… what they do to me as long as we keep safe all that we have worked for” The size of the money laundering problem cannot be accurately quantified but, in a research project funded by AUSTRAC and drawing on a wide range of financial and other data relating to 1994, it was estimated that in that year “a range of between $1000 million and $4500 million would appear to be a sensible interpretation of the information provided in these sets of estimates, with perhaps some confidence that the most likely figure is around $3500 million, since this figure lies within all three estimate ranges”.
- 2. The definitions of money laundering
The definitions of money laundering most frequently used in domestic legislative provisions is derived from that used in the 1988 United Nations Convention against Illicit Traffic in Narcotic “Drugs and Psychotropic Substances” which provides that money laundering is
The conversion or transfer of property, knowing that such property is derived from any indictable offence or offences, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person, who is involved in the commission of such an offence or offences to evade the legal consequences of his or her actions or
The concealment or disguise of “the true nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that such property is derived from an indictable offence or offences or from an act of participation in such an offence or offences”.
Similarly, in the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime, money laundering is defined as follows
The conversion or transfer of property, knowing that such property is proceeds, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of the predicate offence to evade the legal consequences of his actions;
The concealment or disguise of “the true nature, source, location, disposition, movement, rights with respect to, or ownership of, property, knowing that such property is proceeds”.
- 3. Predicate offence
According to UNCAC, the term “predicate offence” means any offence as a result of which proceeds have been generated that may become the subject of an offence of the UNCAC on “Laundering of proceeds of crime”.
- 4. Enforcement and predicate crimes
Until September 11, 2001, the primary emphasis of money-laundering enforcement in the United States and elsewhere was on reducing predicate offenses- initially the sale of illegal drugs, but more recently a wide array of crimes. Critical to the prevention pillar of those efforts is the flow required reports that are intended to generate investigative information. More important are the number and characteristics of criminal prosecution and convictions for money laundering, and the application of associated penalties such as seizures and forfeitures.
- 5. ‘Property’ and ‘Proceeds’
‘Property’ and ‘Proceeds’ are also defined as follows
- Proceeds: means any economic advantage from criminal offences. It may consist of any property as defined in sub-paragraph b of this article;
- Property: includes “property of any description whether corporeal or incorporeal, movable or immovable, and legal documents or instruments evidencing title to or interest in such property”.
Australia discharged this obligation with the passage of the POC Act in 1987 which included two money laundering offences, namely section 81 (money laundering) and section 82 (possession etc. of property suspected of being proceeds of crime). These sections are as follows
In this section:
- I. Transaction includes the receiving or making of a gift.
- II. A person who, after the commencement of this Act, engages in money laundering is guilty of an offence against this section punishable, upon conviction, by:
(a) If the offender is a natural person — a fine not exceeding $200,000 or Imprisonment for a period not exceeding 20 years, or both; or
(b) If the offender is a body corporate — a fine not exceeding $600,000.
- III. A person shall be taken to engage in money laundering if, and only if:
(a) The person engages, directly or indirectly, in a transaction that involves money, or other property, that is proceeds of crime; or
(b) The person receives, possesses, conceals, disposes of or brings into Australia any money, or other property, that is proceeds of crime; and the person knows, or ought reasonably to know, that the money or other property is derived or realized, directly or indirectly, from some form of unlawful activity.
Money laundering provisions have since been enacted in New South Wales, Victoria and Queensland. “The NSW provision requires proof of actual knowledge that the money or property was proceeds of unlawful activity”, and there is no equivalent to the Commonwealth section 82 offence.
“The Victorian provisions are virtually identical to sections 81 and 82”, as are those of “Queensland”. However, the Queensland provisions are wider in that they relate to ‘tainted property’ as opposed to only ‘proceeds of crime’ as in the New South Wales, Victorian and Commonwealth legislation. Another novelty about the Queensland provision is that it explicitly permits an act or two or more acts committed at the same time or at different times, or “tainted property relating to an offence or two or more offences committed by the same or different persons, to be included in a single charge”. Additionally, it provides that “the person who committed the predicate offence may be convicted of money laundering in relation to tainted property which resulted from or was involved in the commission of the offence”.
Finally, both “the NSW and Victorian provisions provide a defense where the defendant satisfies the court that the money laundering was engaged in to assist the enforcement of the law”.
- Reforms proposed in submissions
- Submissions to the Commission have raised two related concerns with the operation of section 81. The first relates to the fact that the offence of money laundering is only provable if the proscribed conduct has been engaged in with money or other property that is proceeds of crime; that is, the proceeds of a proven predicate offence. The second relates to the practical difficulty experienced by law enforcement bodies in obtaining evidence sufficient to connect money laundering activity with specific predicate offences.
- One particular concern expressed to the Commission is that, especially in cases of suspected ongoing criminality, money laundering reasonably suspected to be related to prior offences or conduct in respect of which proceedings cannot be brought for want of evidence cannot itself be prosecuted since the establishment of that prior offence is an essential ingredient of the money laundering offence. Moreover, where evidence of conduct of a money laundering kind subsequently leads to the detection of the accused in the commission of a later offence in respect of which, due to the arrest, no proceeds were generated, there is no possibility of achieving a conviction for money laundering on the basis of that offence as the relevant predicate offence.
The following passage from the AFP submission describes these difficulties by reference to particular examples and argues for reform on the basis of the experience gained thereby
In proceedings under s 81, the AFP is required by the POC Act to prove the original offence beyond reasonable doubt to ensure a conviction, and also to prove that the funds are indeed the proceeds of that offence. This direct connection between the funds and the original crime is often difficult, owing chiefly to the covert nature of the criminality, as to be operationally impossible; it is rare for the offenders in question to record or otherwise keep receipts for their activities.
Further, as mentioned earlier a large number of investigations conducted by the AFP are drug related. A successful drug operation will normally result in an offender being found in possession of the drugs which are subsequently seized. There are, in these cases, not proceeds of the crime for which the offender is charged (as the drugs were never delivered or sold) although the offender may have substantial assets and have remitted a great deal of money in payment for the current importation or in relation to other importations.
Several months later his clients were arrested in relation to an importation of around 23 kilograms of heroin, and were also later charged with two previous importations. The accountant was interviewed and admitted he was paid to transfer the money overseas. However, “the DPP were of the view that the funds being handled by the accountant were prior to the detection of the heroin importations”, and that a link could not therefore be established that the money transferred was indeed the proceeds of the importation of the heroin.
In another matter, the AFP identified a range of financial transactions that were of interest, involving the remittance of around $1.3 million to Canada and Hong Kong by Australian based Chinese. In the course of the investigation, the AFP detected an importation of around 55 kilograms of heroin. Inquiries also identified other importations related to the same principal offenders. “The DPP were not satisfied that the link between the cash remitted and the importations was sufficiently direct to enable prosecution” under s 81, and declined to lay money laundering charges.
Money laundering, as constituted under s 81 of the POC Act should be sufficiently flexible to enable prosecution where money is laundered in order to commit the principal offence, for instance, making payment for a pending importation of heroin. Further, where such large amounts of money are remitted overseas, and the transactions relate to offenders in Australia for serious Commonwealth offences which generate and require payment of large amounts of money, there should be some presumption that the funds are the proceeds of a crime rather than some direct and certain connection having to be established. Alternatively, consideration may be given to shifting the onus of proof onto the defendant as to the legitimate acquisition or possession of the property in question. This is especially the case in circumstances where through “asset betterment these offenders could be shown to be living beyond their means and incapable of otherwise generating the amount of money being remitted”.
According to the submissions from the “AFP and the NCA, however, the section has not lived up to expectations”. In particular, they are concerned that the effect of the language of section 82(1) is to require proof that the money or property in question is reasonably suspected of being the proceeds of a particular identifiable predicate offence. By contrast, the analogous offence of possession referred to by the former Attorney-General does not require such proof. There may be other ways in which “the provisions could be given a wider operation without exceeding Constitutional limits”.
- 7. Improving Criminal Justice System Performance
AML regimes might have two other benefits in addition to controlling crime: improving the efficiency of the system or catching offenders who otherwise would escape. Mariano-Florentino Cuellar(2003) concedes that such regimes might have improved efficiency in drug control and in reduction a few related criminal activities, but argues that they have failed in the second area. The US AML regime principally has been used to increase the penalties with which prosecutors can threaten predicate offenders. The regime has had little success in apprehending professional money launderers or high-level criminals.
The paucity of cases against stand-alone launderers and investigations that have their origin in money-laundering information supports the criticism that the AML regime has brought in few new offenders. There are no systematic data on the origins of cases against major criminals such as principal drug dealers, so it is impossible to tell whether more of them are being captured through money-laundering laws and investigations.
- 8. How Risk is Money Laundering
However crude, an estimate of how risky money laundering in the United States has become as a result of the AML regime is helpful in assessing regime performance. About 2,000 people are convicted of money-laundering offenses (primary or otherwise) each year in the United States. For the moment, assume that all of those convicted are providers of, rather than customers for, the service. This assumption imparts an upward bias to our risk estimate, since we know that some of those convicted are not standalone providers of money-laundering services.
To estimate risk, a figure for the total number of persons who launder money is also needed. No such estimate is available, so an indicative calculation is all that can be offered. Assume total US money laundered annually is near the low end of convicted are reportedly involved with laundering more than $1 million, but that is the amount involved in the specific transactions detected, not an annual flow. If an average money launderer handles $10 million per annum, then there would be 30,000 money launderers, and the probability of conviction would be about 6.7%(2000/3000). For comparison, there are estimates available that the probability of incarceration for selling cocaine in the late 1980s was approximately 25% to 30%. Though dated, these are the only such estimates for an illegal market.
- 9. Conclusion
For both conceptual and empirical reasons, it is impossible to assess directly how much the current AML regime has reduced the volume of white- collar crime, drug dealing, and other illicit market activity. Little information is available about the prices charged by money launderers, and that price itself is a poor representation of the total client cost of money laundering. Even without having found enough data in the public domain to judge whether prices have risen for particular types of transactions, it would appear that money laundering is not a particularly risky business, given the record of federal convictions. Nor does it seem plausible that a more effective antimony laundering regime would increase costs to criminal offenders, even drug dealers, enough to be observable with current data series.
The most useful assessment would be an index of the difficulty of laundering money, with difficulty measured as a combination of cost, risk, and inconvenience. Such an assessment would require the systematic collection of data at prices using everything from undercover operations to debriefing those arrested for purchasing or providing services.
 Temby QC The Proceeds of Crime Act: one year’s experience, 13 Crim LJ 24, 30.
 J Walker Estimates Of The Extent of Money Laundering In And Through Australia AUSTRAC September
 Although that was restricted to narcotics related offences.
 Australian Treaty Series 1993 No 4 UNTS art 3(1)(b).
 ETS No 141 art 6.
 See assetrecovery.org
 id art 1.
 COPOC Act (NSW) s 73.
 Confiscation Act (Vic) s 122 and 123.
 CC Act (Qld) s 90 and 92.
 CC Act (Qld) s 91(4).
 CC Act (Qld) s 91(5).
 COPOC Act (NSW) s 73(5) and Confiscation Act (Vic) s 122(3) respectively.
 POC Act (NSW) s 81 and 82 (money laundering) and s 83.
 Ridgeway v R (1995) 69 ALJR 484.
 AFP Submission 7.
 AFP Submission 7 and NCA Submission 16.
DPP Submission 8.
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