October 5, 2017

Money launderers remain ahead of authorities by using ‘sophisticated methods’, US expert says

By senior business correspondent Peter Ryan

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.

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