AUSTRAC. Typologies and Case Studies Report 2008

Transcription

1 AUSTRAC Typologies and Case Studies Report 2008

2 Commonwealth of Australia 2008 This work is copyright. You may download, display, print and reproduce this material in unaltered form only (retaining this notice) for your personal, non-commercial use or use within your organisation. Where material has been sourced from other third-party sources, copyright continues. Acknowledgement: The valuable contribution of reporting entities and AUSTRAC s designated agencies in producing this document is acknowledged. Disclaimer: The information contained in this document is intended to provide only a summary and general overview on these matters. It is not intended to be comprehensive. It does not constitute nor should it be treated as legal advice or opinions. The Commonwealth accepts no liability for any loss suffered as a result of reliance on this publication. AUSTRAC recommends that independent professional advice be sought. The information contained herein is current as at the date of this document.

3 AUSTRAC Typologies and Case Studies Report 2008 Foreword Foreword AUSTRAC provides many resources to improve the community s understanding of the threat of money laundering and terrorism financing in Australia, and to assist its regulated population to comply with the Anti-Money Laundering and Counter-Terrorism Financing Act The AUSTRAC Typologies and Case Studies Report 2008 is an important addition to this growing collection of resources. Based entirely on Australian case studies, this report details some of the known elements and indicators of money laundering and terrorism financing. It draws on the combined knowledge of AUSTRAC s financial intelligence analysts and government partner agencies to offer real-life examples of how commercial systems can be misused by criminal elements. While the report is intended to be a valuable tool to help reporting entities comply with their regulatory and reporting obligations, it will also support law enforcement, national security and revenue agencies by drawing together the work of their counterparts into an up-to-date resource to assist investigations into serious and organised crime. AUSTRAC is extremely grateful for the contribution made by its Australian partners to the preparation of this report. Neil J Jensen PSM Chief Executive Officer, AUSTRAC AUSTRAC typologies and case studies report

4 AUSTRAC Typologies and Case Studies Report 2008 Contents Contents Introduction 3 Report methodology 4 Emerging threats 5 Designated service case index 6 Money laundering methodologies 7 Suspect transaction reports 11 Feedback process 12 Case studies Banking (ADIs) - Bullion 14 Banking (ADIs) - Gambling - Motor vehicles - Securities and derivatives 16 Banking (ADIs) 18 Banking (ADIs) - Money transfer (remittance) 31 Banking (ADIs) - Money transfer (remittance) - Motor vehicles 36 Banking (ADIs) - Money transfer (remittance) - Real estate 38 Banking (ADIs) - Motor vehicles - Real estate 39 Banking (ADIs) - Professional services 40 Banking (ADIs) - Securities and derivatives 42 Banking (ADIs) - Money transfer (remittance) 44 Banking (ADIs) - Money transfer (remittance) - Professional services 46 Banking (ADIs) - Motor vehicles - Real estate 48 Banking (ADIs) - Professional services 50 Banking (ADIs) - Securities and derivatives 51 Bullion 52 Bullion - Money transfer (remittance) 53 Foreign exchange - Gambling 54 Foreign exchange - Motor vehicles 55 Gambling 56 Gambling - Non-bank financial services 58 Money transfer (remittance) 59 Money transfer (remittance) - Stored value cards 61 Money transfer (remittance) - Motor vehicles - Real estate 62 Money transfer (remittance) - Travel products 64 Professional services - Real estate 65 Professional services 66 Stored value cards 68 Appendices Appendix A: of potential ML/TF activity 69 Appendix B: Further information on ML/TF typologies 72 Subject index 74 Abbreviations 76 2 AUSTRAC typologies and case studies report 2008

5 AUSTRAC Typologies and Case Studies Report 2008 Introduction Introduction The Australian community is not immune from new and emerging threats to its security from domestic and transnational organised crime syndicates and terrorist groups. Just as communities and businesses globalise and embrace new technologies, so too do crime syndicates. They now operate across state and international boundaries, forming strategic partnerships between previously unrelated groups. The financial system, both regulated and unregulated, has increasingly become the vehicle for moving illicit profits around the world. Complex business structures interwoven within global trade can provide a veil under which criminal groups may operate. In Australia, creating an environment that is hostile to money laundering and terrorism financing (ML/TF) requires the continued cooperation of government bodies and industries to ensure the effectiveness of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). The AML/CTF Act was implemented to support an environment which exposes the activities of criminal and terrorism groups and supports the law enforcement investigations that dismantle them. The Act provides a legislative foundation for AUSTRAC to work with Australia s financial and gambling sectors to generate financial information and build an AML/CTF program to prevent the misuse of Australia s financial system. Financial transaction reports (FTRs) produced by reporting entities help us understand how ML/TF occurs and follow the illicit money trail. In turn, we can use this information to develop resources on typologies and case studies. This collaborative cycle of information sharing between reporting entities, AUSTRAC, and partner agencies is critical in protecting Australia s financial systems. AUSTRAC s purpose is to protect the integrity of Australia s financial system and contribute to the administration of justice through our expertise in countering money laundering and the financing of terrorism. AUSTRAC typologies and case studies report

6 AUSTRAC Typologies and Case Studies Report 2008 Report methodology Report methodology The information contained in this report was generated from the following research material: sanitised cases from AUSTRAC s partner agencies existing AUSTRAC strategic and typology research publicly available open source information. This report identifies some key methods that have been used in Australia to conceal the origins of illicit funds or, in the case of terrorism financing, conceal the purpose for which those funds were intended. These methods are illustrated through the use of case studies and diagrams. This report is limited to case study examples that are approved for external use. Each case study within this report has been presented in a way that highlights the common elements involved in the ML/TF process. These are: the crime or civil proceeding involved (not the actual charges) customer the type of customer/s involved in perpetrating the offence (this can be an individual, business or foreign entity) industry the industry through which transactions were conducted in some cases multiple industries were involved. Although the cases within this report have been grouped by industry, cases can also be located by referring to the designated service case index on page 6, or the subject index on page 74 channel the means by which the offenders completed or attempted to complete transactions (predominantly either in person, via electronic means or through an intermediary/third person) the location (domestic or international) in which the transactions were facilitated 1 designated service the type of designated service, or other financial product, that was used in the offence indicators the red flag activity which would indicate the possibility of ML/TF activity. An extensive list of indicators used in this report can be found in Appendix A. 1 For the purposes of this report, designated services listed in the tables in section 6 of the AML/CTF Act have been grouped into 20 categories containing similar activities. A designated service case index appears on page 6 of this report. 4 AUSTRAC typologies and case studies report 2008

7 AUSTRAC Typologies and Case Studies Report 2008 Emerging threats Emerging threats The case studies provided in this report reveal the evolving nature of ML/TF and related criminal conduct. Transnational crime Many crime syndicates now operate across international borders, posing a direct threat to Australia. The case studies in this report show how Australia, no longer sheltered by its geographical remoteness, is being targeted by crime syndicates from many parts of the world, and how the criminal profits made in Australia are then moved overseas. Technological advances Sophisticated criminals are exploiting technology, especially the increased availability of internet-based financial products. The New South Wales Police recently uncovered a scam in which and SMS were used to elicit between AUD5,000 and AUD8,000 each from the victims. This represents a new variation on phishing scams which attempt to obtain personal information or the payment of money. 2 The Australian Institute of Criminology has released a paper entitled Future directions in technology-enabled crime: , which discusses the effect of technology on globalisation, emerging economies, digital and social networking, and the changing nature of funds transfer systems. The paper details how technology is creating new opportunities for illegal activities, especially fraud, identity crime, computer vandalism, theft of information, online distribution of objectionable material, organised crime and terrorism. 3 AUSTRAC and its enforcement and regulatory partners must be vigilant to the changing environment and technological advances which can be used to circumvent existing legislation and regulation. Organised crime internet A significant trend emerging among Australian organised crime groups is money laundering through internetbased financial products. Online products do not require face-to-face interaction and can deliver rapid and multiple funds transfers across national boundaries. Internet payments, mobile payments and digital precious metals, such as e-gold, are of particular concern. 4 Organised crime legitimate business structures Another trend emerging in Europe has been the increased exploitation of legitimate companies to launder money or to support criminal activities. These findings suggest that organised criminal groups are becoming more proficient at influencing legitimate business. Transport and import/export businesses are often targeted. The nature of these businesses often requires major operational activities to be subcontracted. This decentralisation of control creates vulnerabilities that organised crime groups can exploit. There is also the potential for organised crime group members to occupy specific roles within the transport chain to facilitate their activities. 5 2 Danks, K 2008, death threat scam, The Sunday Telegraph, 6 July Choo, KWR, Smith, RG & McCusker, R Future directions in technology-enabled crime: , Australian Institute of Criminology, Canberra, retrieved 8 July 2008, from < 4 Parliamentary Joint Committee on the Australian Crime Commission, 2007, Inquiry into the future impact of serious and organised crime on Australian society. 5 EUROPOL, 2007, EU Organised Crime Threat Assessment. AUSTRAC typologies and case studies report

8 AUSTRAC Typologies and Case Studies Report 2008 Designated service case index Designated service case index The following table provides a reference to the case studies outlined in this report that involve designated services under the AML/CTF Act. AUSTRAC has grouped similar services for ease of use and analysis. Some designated services have limited or no case examples because they were not previously classified as reportable transactions under the Financial Transaction Reports Act 1988 (FTR Act), or because the case studies are pending approval for external use. Designated service category AML/CTF Act section 6 item number/s Case study number Accounts 1, 2, 3 1, 2, 3, 4, 7, 8, 9, 10, 11, 12, 16, 17, 18, 19, 20, 21, 24, 25, 26, 27 Money on deposit 4, 5 9, 14, 26 Loan services 6, 7, 48, 49 1, 3, 13 Debt instruments 8, 9, 17, 34, 36 Leasing service 10, 11, 12, 13 Accounts chequebook facility 14, 15 6, 12 Trust accounts chequebook facility 16 Accounts debit card facility Trust accounts debit card facility 18, 18A, 19, 19A 20, 20A Payment orders and stored value cards 21, 22, 23, 24, 27, 28 37, 42 Electronic funds transfer 29, 30 4, 5, 13, 15, 16, 20, 22, 23, 24, 27, 28, 31, 33, 41 Designated remittance arrangement 31, 32 13, 14, 15, 16, 17, 18, 23, 24, 25, 30, 35, 36, 37, 38, 39 Deals in securities markets 33, 35 2, 21, 22, 28 Insurance and superannuation services 37, 38, 39, 40, 41, 42, 43, 43A, 43B, 44, 45 Custodial or depository service 46, Foreign exchange services 25, 26, 50 25, 30, 31, 32 Cash carrying and payroll services 51, 52, 53 Australian financial services licence Bullion trading Table 2 (1, 2) 1, 29, 30 Gambling services Table 3 (1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14) 34 2, 33, 34 6 AUSTRAC typologies and case studies report 2008

9 AUSTRAC Typologies and Case Studies Report 2008 Money laundering methodologies Money laundering methodologies This section details some of the common methods of money laundering in use in Australia. These methods are illustrated further in the case studies of this report. Cash The use of cash remains prominent in the money laundering process. The profits made from criminal activities are often returned to the criminals in the form of cash, which then needs to be re-introduced to the mainstream financial system to appear legitimate. Methods of money laundering include: structuring of transactions; that is, breaking down large quantities of cash into amounts which will fall under the Australian financial system s $10,000 cash transaction reporting threshold. Structuring can be achieved through: regular deposits of cash into accounts in amounts that fall below the reporting threshold regular use of cash to purchase instruments such as bank cheques and bank drafts, or to load onto credit or stored value cards in amounts below the reporting threshold using multiple branches or agencies, often within a short timeframe, to avoid detection establishing accounts at multiple institutions using third parties to make deposits into a single account or multiple accounts depositing cash during busy periods, holiday shutdowns and closing times to avoid raising suspicion exchanging smaller denomination notes into larger denomination notes purchasing and/or exchanging Australian currency into foreign currencies to obtain large denominations such as the 500 euro note or the United States $100 bill exchanging or making deposits of foreign currency at Australian financial institutions purchasing other commodities such as gold and precious stones which can be quickly converted back into cash, often at a profit making cash payments for either the purchase or lease of assets such as motor vehicles, or using cash to purchase cheques for the same purpose regularly depositing cash into established loans or investments of particular interest are services which offer less scrutiny of a customer s income such as no-doc and low-doc loans which do not require significant evidence of customer identification. Betting accounts Betting accounts offer an alternative to accounts held with mainstream financial institutions and in many instances can be used as de facto savings and deposit accounts. The frequent movements of funds through such accounts for non-gaming purposes should raise suspicion and may be indicative of money laundering or revenue evasion. Cuckoo smurfing Cuckoo smurfing has been identified as another emerging form of money laundering and has recently received coverage in the Australian media. Australia s AML/CTF professionals need to become familiar with this organised, transnational and highly coordinated process so that they may then incorporate this information into AML/CTF programs and staff training. AUSTRAC typologies and case studies report

10 AUSTRAC Typologies and Case Studies Report 2008 Money laundering methodologies The term cuckoo smurfing originated in Europe because of similarities between this typology and the activities of the cuckoo bird. Cuckoo birds lay their eggs in the nests of other species of birds which then unwittingly take care of the eggs believing them to be their own. In a similar manner, the perpetrators of this money laundering typology seek to transfer wealth through the bank accounts of innocent third parties. There are four key steps in this process: Step 1 A legitimate customer deposits funds with an alternative remitter in a foreign country for transfer into another customer s Australian bank account. This is a legitimate activity and is often a cheaper and faster alternative to using a mainstream bank. Step 2 Unbeknown to the customer, the alternative remitter is part of a wider criminal syndicate involved in laundering illicit funds. This criminal remitter, while remaining in the foreign country, provides details of the transfers, including the amount of funds, to a criminal based in Australia. This includes the account details of the intended recipient in Australia. Step 3 The Australian criminal deposits illicit cash profits from Australian crime syndicates into the bank account of the customer awaiting the overseas transfer. The cash is usually deposited in small amounts to avoid detection under transaction threshold reporting requirements. After an account balance check, the customer believes that the overseas transfer has been completed as legitimately arranged. Step 4 The Australian criminal travels overseas and accesses the legitimate money that was initially deposited with the alternative remitter. The illicit funds have now been successfully laundered the criminal owes nothing but a commission to the money launderer for their work. It is important to recognise the high level of sophistication and organisation required to successfully operate a cuckoo smurfing syndicate. The essential actors in a typical scenario are: an innocent customer seeking to transfer funds from overseas into Australia. This innocent customer could be either: an Australian customer overseas seeking to transfer funds into their own account in Australia, or an innocent customer overseas seeking to transfer funds to another customer located in Australia a criminal alternative remitter located overseas a complicit, Australian-based criminal seeking to transfer funds overseas an organiser or coordinator in Australia associates of this organiser or coordinator who make third party deposits into the Australian customer s account. Bank staff in particular should be alert to third parties making structured, or otherwise unusual, cash deposits into third party accounts. The essential weakness being exploited by cuckoo smurfing is the lack of identification required of persons depositing funds into third party accounts. 8 AUSTRAC typologies and case studies report 2008

11 AUSTRAC Typologies and Case Studies Report 2008 Money laundering methodologies Cuckoo smurfing in action Domestic electronic transfers The ability to pool funds in accounts has been made much easier with internet banking. Although financial institutions have established internet banking thresholds, customers still have the capacity to transfer large amounts over a relatively short space of time. s may deposit cash funds into an account and then undertake rapid domestic transfers to separate accounts. This type of activity can be indicative of any number of criminal activities and should be viewed as a possible indicator of illicit activity, particularly if the activity is inconsistent with information about the customer, their business or previous account history. False and fraudulent identification Identity fraud is a significant issue for law enforcement in Australia. Through the use of false names and fraudulent identity documentation, bogus accounts, debit and credit facilities, loans, equity and assets can be obtained. These legitimate financial products can be exploited for money laundering and fraudulent participation in tax schemes where money appears to be borrowed legitimately against established equity. AUSTRAC typologies and case studies report

12 AUSTRAC Typologies and Case Studies Report 2008 Money laundering methodologies Gatekeepers A gatekeeper is a person with specific knowledge about services or structures which can be misused for money laundering. These people are not necessarily directly involved in money laundering but they may wittingly or unwittingly assist third parties to distance their criminal activity from their illicit profits. Gatekeepers are commonly accountants, legal practitioners, notaries, and other similar professionals. Reporting entities should be alert to the roles certain professionals can play in money laundering. Wire transfers International funds transfers, or wire transfers, are often used by criminals to rapidly transfer funds across international boundaries. Multiple wire transfers, each bearing different transfer details, are often sent to disguise their true nature. This method also creates a convoluted audit trail which hampers investigations of both private sector AML/CTF staff and law enforcement. Criminals may also set up illegitimate businesses or corporations to send wire transfers. This not only conceals the true identity of the criminal, but the transfers can be hidden among the complexities of established international trade and financial market activities. By having a good knowledge of customers and businesses, and by monitoring unusual spikes in activity, reporting entities can detect suspicious activity and report it to AUSTRAC as appropriate. Other resources There are several other key sources of information about ML/TF methodologies and typologies. The Financial Action Task Force (FATF) website, and particularly its Publications link to Methods and Trends, details the history of research undertaken by global experts on money laundering (see Appendix B of this report for a detailed list of FATF research topics). Of interest is the report entitled FATF Terrorist Financing Typologies Report. Similarly, the Asia/Pacific Group on Money Laundering (APG) produces information on typologies relevant to our region, and the Egmont Group of Financial Intelligence Units provides a library of sanitised case studies on its website. Public records of court proceedings in criminal cases provide another source of information. Before passing sentence in a criminal case, judges will read onto the public record a statement outlining the crime and the reasons for the sentence. This will often include a summary of the investigation and the evidence that was presented to the court during the case. In ML/TF cases, such evidence can reveal the methods used by the criminals. Judges remarks are publicly available from the websites of every court in Australia. The search functions of these websites are not specifically designed for ML/TF research, so it may be necessary to use a specific law enforcement agency or crime committed as search criteria. An example website is: < nsw.gov.au>. Internet searches on topics such as money laundering or terrorism financing, or specific crime types, can provide additional information. 10 AUSTRAC typologies and case studies report 2008

13 AUSTRAC Typologies and Case Studies Report 2008 Suspect transaction reports Suspect transaction reports Many law enforcement investigations into ML/TF in Australia are initiated or supported by the FTRs submitted by Australian businesses and individuals. Several of the case studies within this report were prompted after suspect transaction reports (SUSTRs) were provided to AUSTRAC by diligent reporting entities. These SUSTRs provided important financial data which supported the arrest and conviction of criminals, and the seizure of their criminally funded assets. Although every effort has been made to capture emerging money laundering threats under the AML/CTF Act, it is inevitable that new products and services will be introduced that are vulnerable to exploitation for ML/TF. It is important that reporting entities, AUSTRAC, and its partner agencies continue to work together to identify new and modified criminal behaviour. Quality SUSTRs and, from 12 December 2008, suspicious matter reports (SMRs) submitted by reporting entities are essential for protecting Australia from the effects of ML/TF. Suspect transaction reports provided by industry are extremely valuable pieces of financial intelligence. Investigating and prosecuting complex criminal matters requires discretion on the part of law enforcement agencies, and this may limit the extent to which we are able to directly acknowledge those who submit these reports, in a timely manner. We can, however, assure those people submitting reports that their efforts often lead to significant law enforcement outcomes and prevent criminals from profiting from their activities. Almost without exception, in the investigation of any major criminal matter reported in the media, the investigation will have benefited from access to AUSTRAC s database of financial transaction information. Neil J Jensen PSM Chief Executive Officer, AUSTRAC AUSTRAC typologies and case studies report

14 AUSTRAC Typologies and Case Studies Report 2008 Feedback process Feedback process Under the FTR Act and AML/CTF Act, one of AUSTRAC s primary functions is to collect and analyse FTRs, and disseminate financial intelligence to partner agencies for use in their investigations and operations. To ensure this process continues, it is essential that our partner agencies provide feedback on the usefulness of FTRs and other intelligence products. Of greatest benefit is feedback related to investigations or operations identifying how illicit funds were used to support terrorism groups. It is also important that AUSTRAC receives feedback on investigations where money laundering was committed but not detected in a FTR. This can help us identify ML/TF methods that could be used by criminals to circumvent the AML/CTF legislation. This information will allow AUSTRAC to refine its resources for reporting entities. Feedback we receive from our partner agencies principally assists AUSTRAC in: assessing AUSTRAC s effectiveness in achieving the objectives of the FTR Act and AML/CTF Act assessing and analysing the value of AUSTRAC information developing typologies which improve ML/TF monitoring systems and other intelligence products providing reports, resources and educational materials to reporting entities providing partner agencies with information about ML/TF methods being used within Australia and internationally providing presentations and case studies that support the global effort to combat ML/TF. Australia makes important contributions to the ML/TF typologies exercises of the FATF, the Egmont Group of Financial Intelligence Units and the APG. All information provided to AUSTRAC is handled with the appropriate levels of sensitivity and security. The diagram opposite illustrates the important collaborative process between government and industry to combat ML/TF in Australia. 12 AUSTRAC typologies and case studies report 2008

15 AUSTRAC Typologies and Case Studies Report 2008 Feedback process AUSTRAC feedback cycle AUSTRAC typologies and case studies report

16 AUSTRAC Typologies and Case Studies Report 2008 Case studies Banking (ADIs) - Bullion Case studies Case 1 Fraudsters cashed in with false identification documents A law enforcement agency launched an investigation into two persons after they were caught in possession of numerous counterfeit driver s licences and several charts detailing multiple identities. The charts related to false loans and other fraudulent activities. The suspects were also in possession of keys to 30 post office boxes scattered around Australia. The suspects were identified by law enforcement officers as Indian nationals in Australia on student visas who were also licensed taxi cab drivers. Further investigations indicated the suspects were part of a syndicate that recruited people from India to undertake loan fraud within Australia. The syndicate paid for recruits to relocate to Australia as students, and once in Australia the students found work in the taxi and hire car industry. It is alleged that by working for these companies the recruits were able to steal personal details from victims to lodge fraudulent claims for loans from financial institutions. The offenders opened credit card accounts with numerous banks and had the cards and personal identification numbers delivered to post office boxes. The syndicate employed full-time couriers who travelled interstate to collect the mail from the post office boxes. The offenders collected the cards, depleted the accounts, and forwarded the money to other syndicate members for the purchase of gold bullion and for living expenses. The cards were depleted of all funds, usually between AUD10,000 and AUD15,000, or were used directly to purchase bullion. The couriers kept only approximately AUD200 for themselves, with the remaining funds returned to the main organisers. It is alleged that the bullion and cash were repatriated to overseas entities. Designated service Fraud Individual Banking (ADIs) Bullion Physical Mail International India Bullion trading Accounts Loan services Available credit being maximised in short space of time without repayment Cash purchases of bullion Newly opened accounts have credit cards and other details mailed to post office boxes No repayment or attempted repayment on credit Use of false identification 14 AUSTRAC typologies and case studies report 2008

17 AUSTRAC Typologies and Case Studies Report 2008 Case studies Banking (ADIs) - Bullion POI person/s of interest AUSTRAC typologies and case studies report

18 AUSTRAC Typologies and Case Studies Report 2008 Case studies Banking (ADIs) - Gambling - Motor vehicles - Securities and derivatives Case 2 Crime network laundered money through bank accounts, shares and luxury vehicles AUSTRAC referred a financial intelligence assessment and a SUSTR on to a law enforcement agency, which led to an investigation into the alleged money laundering activities of a criminal syndicate linked to suspected drug trafficking. The alleged activity involved the movement of several million dollars through bank accounts, a shares portfolio and the purchase of luxury motor vehicles. AUSTRAC was alerted to the fact that an individual was banking large amounts of cash on a daily basis, totalling anywhere between AUD20,000 and AUD60,000 per week, for months. In the information AUSTRAC referred to the law enforcement agency, a syndicate member was initially identified by AUSTRAC as a result of approximately AUD300,000 in his account which had been sourced from two casino cheques. Further analysis of AUSTRAC information revealed that the suspect had made over AUD2 million in cash deposits into bank accounts that he operated. As the investigation gathered momentum, search warrants were executed on properties linked to the syndicate members. Numerous property tracking documents relating to syndicate assets and unexplained wealth were seized by law enforcement officers. Investigators located a bank account with a balance of approximately AUD800,000 and a 2006 Mercedes sedan that had been purchased for AUD300,000. Both the bank account balance and the vehicle were suspected of being derived from proceeds of crime. Law enforcement officers interviewed a syndicate member about these assets and he could offer no explanation as to how he had obtained the level of funds described while earning only a mid-level salary. 16 AUSTRAC typologies and case studies report 2008

19 AUSTRAC Typologies and Case Studies Report 2008 Case studies Banking (ADIs) - Gambling - Motor vehicles - Securities and derivatives The execution of another search warrant on a property linked to the initial syndicate member revealed over AUD1.2 million in cash, and small amounts of methylamphetamine ( ice ). In addition, law enforcement officers seized numerous luxury items and home entertainment equipment believed to be the proceeds of criminal offences. Another residence was searched and found to be empty. It was noted, however, that the rent on this property had been paid months in advance. This same person of interest had also bought shares and motor vehicles in a direct relative s name, and AUD300,000 was discovered in an account belonging to the same relative. It was ascertained that this particular relative was earning approximately AUD40,000 a year. The resulting law enforcement investigation into the activities of the syndicate members has led to a total of approximately AUD3.9 million being recovered or restrained. Designated service Money laundering Drug trafficking Individual Banking (ADIs) Gambling Motor vehicles Securities and derivatives Physical Agent/third party Domestic Accounts Deals in securities markets Gambling Assets purchased in family member s name Cash purchase of high-value assets (motor vehicles) Financial activity inconsistent with established customer profile Large cash deposits into bank accounts on a regular basis Rent for property paid well in advance Use of third party accounts AUSTRAC typologies and case studies report

20 AUSTRAC Typologies and Case Studies Report 2008 Case studies Banking (ADIs) Case 3 False identification used in bank fraud An individual involved in large-scale bank fraud created a range of false identification documents to open bank accounts and apply for personal loans and credit cards. The individual deposited the money received from the loans into a bank account. The bank statement received for the account was then used at another bank as proof of financial means to apply for further loans. The offender initially opened savings accounts and credit cards with the loan funds, which were then deposited to another account after approval. Once the money was in the account, either the offender or one of two associates withdrew the funds as bank cheques (on the justification of buying a car or similar) made out to other false identities with false accounts and then deposited the cheque/s into these accounts. Funds were also withdrawn as cash via ATMs or bank branches. The offender repeated this process using multiple false identities, fraudulently generating over AUD1 million in funds. Designated service Fraud Individual Banking (ADIs) Physical (face-to-face) Domestic Accounts Loan services An individual or business client has multiple bank accounts with several institutions, but with no economic rationale for having them is known to be operating multiple accounts Multiple bank cheques purchased by different individuals but payable to a common beneficiary Payments by large third party cheques endorsed in favour of the customer Use of false identification documentation 18 AUSTRAC typologies and case studies report 2008

21 AUSTRAC Typologies and Case Studies Report 2008 Case studies Banking (ADIs) POI person/s of interest AUSTRAC typologies and case studies report

22 AUSTRAC Typologies and Case Studies Report 2008 Case studies Banking (ADIs) Case 4 Large wire transfers sent to support terrorist activities Law enforcement officers commenced an investigation into alleged fundraising and procurement activities by Australian-based persons on behalf of an identified terrorist organisation. Officers examined the activities of the organisation in accordance with Australia s obligations under United Nations Security Council Resolution 1373 (2001). Investigations established that Australian-based individuals were sending a number of large international funds transfers to businesses in another country. These businesses were believed to be front organisations used to control funds for the terrorist organisation. The overseas individuals were subsequently sending multiple wire transfers to South-East Asia. A law enforcement investigation established that the majority of the funds originated from cash raised under the guise of charitable activities. The funds were transferred via direct debit into a central account. Third parties also rolled funds from another account into this central account, to be repaid later. The suspects in Australia funded their activities via cash cheques and credit cards which were linked to the central account. Legitimate businesses, such as grocers, restaurants and hospitality venues were also used for fundraising activities. The funds were distributed by various techniques, including person-to-person, bank account deposits, asset purchases (e.g. real estate), and funds transfers from a main bank account into individuals accounts for alleged expenses relating to the administration of the charitable organisation. The suspects used wire transfers to transfer the money to international bank accounts, and bank transfers to transfer to accounts held within Australia. The individuals frequently conducted these transactions via internet banking 20 AUSTRAC typologies and case studies report 2008

23 AUSTRAC Typologies and Case Studies Report 2008 Case studies Banking (ADIs) AUSTRAC information identified numerous structured wire transfers of values just under AUD10,000 each. One individual transferred in excess of AUD300,000 in this manner. A central account was not used for the wire transfers, instead the wire transfers were organised through several different banks. The majority of the transactions were in the suspects own names, but third parties were used to create the main bank account. Third parties were also used to send wire transfers and conduct purchases using funds withdrawn from the central account. As a result of the investigation, Australian authorities arrested several individuals who have been charged with being members of a terrorist organisation, providing support or resources to a terrorist organisation, and making funds available to a terrorist organisation. Designated service Terrorism financing Money laundering Individual Business Banking (ADIs) Physical Electronic (internet) Agent/third party International South-East Asia Accounts Electronic funds transfer International wire transfers to countries known to be high risk terrorism financing jurisdictions Multiple cash cheques Structured wire transfers Third parties sending wire transfers Third parties used to create bank accounts AUSTRAC typologies and case studies report

24 AUSTRAC Typologies and Case Studies Report 2008 Case studies Banking (ADIs) Case 5 Students laundered money to receive tax concessions Two Chinese students suspected of laundering millions of dollars became the targets of a law enforcement investigation. On entering Australia one of the students was found to be carrying AUD30,000 in undeclared currency. He was charged under section 53 of the AML/CTF Act (failure to declare currency in excess of AUD10,000) and later pleaded guilty to this offence. Further inquiries revealed that the students and their company had received significant incoming funds transfers from Hong Kong. Almost immediately these transactions were followed by similar amounts being sent out of Australia to China. Approximately AUD5.2 million in funds transfers were sent from Hong Kong to the students in Australia. The students subsequently transferred an estimated AUD5.6 million to a company in China. It is possible that the funds being sent from Hong Kong to Australia and then to China actually originated in China. The funds were possibly being used to falsely receive tax concessions from the Chinese government by claiming that the funds were from foreign investors. The investigations established that the pair owned a number of valuable properties despite the fact that one of them was an unemployed student. Both appeared to have unexplained wealth and assets. The two students have been charged with money laundering under section of the Criminal Code Act Designated service Cash couriering Money laundering Individual Banking (ADIs) Electronic International Hong Kong, China Electronic funds transfer Activity inconsistent with customer profile Company accounts used only to transfer money without other corresponding commercial activity Incoming wire transfer with corresponding wire transfer appears to be a u-turn transaction Unusually large transfer of money from an individual to a company 22 AUSTRAC typologies and case studies report 2008

25 AUSTRAC Typologies and Case Studies Report 2008 Case studies Banking (ADIs) AUSTRAC typologies and case studies report

26 AUSTRAC Typologies and Case Studies Report 2008 Case studies Banking (ADIs) Case 6 Asian crime syndicate laundered money with cheques AUSTRAC disseminated a SUSTR to a law enforcement agency, which triggered an investigation into an Asian crime syndicate s money laundering activities. The SUSTR detailed a distinct pattern of regular weekly deposits of cheques to the value of approximately AUD100,000. These deposits were followed a few days later by withdrawals of amounts below the AUD10,000 reporting threshold. A company linked to this syndicate was also found to be funnelling funds through numerous business accounts before withdrawing the cash in structured amounts. The cash was then dispersed between syndicate members. It is believed that this activity was undertaken for tax avoidance purposes and that approximately AUD6.5 million was laundered through the scheme. The resulting investigation led to a number of individuals being arrested and charged with money laundering. Designated service Money laundering Individual Business Banking (ADIs) Physical (face-to-face) Domestic Accounts chequebook facility Cash withdrawals from company accounts Regular deposits followed by structured cash withdrawals 24 AUSTRAC typologies and case studies report 2008

27 AUSTRAC Typologies and Case Studies Report 2008 Case studies Banking (ADIs) Case 7 Criminal structured deposits with waxy notes A SUSTR was lodged with AUSTRAC by a bank employee indicating that an individual had deposited cash into his account using bank notes that felt washed and waxy. The individual had attended the bank branch and deposited AUD7,000 cash in AUD50 denominations, and one week later had deposited the same amount. Law enforcement officers suspected that, three years previously, the individual had been involved in the theft of approximately AUD6.3 million from an ATM. The money had been illegally obtained from the ATM over a period of four months through the use of a stolen credit card. Law enforcement officers alleged that the individual had buried the stolen cash, and was now digging up the money and making structured deposits into his accounts in an attempt to legitimise the stolen funds. The individual was arrested and charged with money laundering and law enforcement was able to recover AUD4.5 million. Designated service Money laundering Theft Individual Banking (ADIs) Physical Domestic Accounts Cash notes are second hand, in poor condition or otherwise tainted Structuring of transactions AUSTRAC typologies and case studies report

28 AUSTRAC Typologies and Case Studies Report 2008 Case studies Banking (ADIs) Case 8 Drug network undertook structured transactions A SUSTR lodged with AUSTRAC by an officer at an authorised deposit-taking institution triggered an investigation into the supply of heroin. The SUSTR detailed the daily occurrence of cash withdrawals of AUD4,500 by an individual. These withdrawals continued over a three-week period and totalled AUD60,000. As a result of this report, law enforcement was able to connect the individual to a known drug dealer. The resulting investigation led to the identification of a heroin supplier, and a law enforcement operation that led to the arrest of the offender and several associates, including the drug dealer. Designated service Drug trafficking Individual Banking (ADIs) Physical (face-to-face) Domestic Accounts Daily cash withdrawals Structured withdrawals clustered over a period of time 26 AUSTRAC typologies and case studies report 2008

29 AUSTRAC Typologies and Case Studies Report 2008 Case studies Banking (ADIs) Case 9 Student arrested carrying $88,000 cash A Chinese national student was stopped while entering Australia on a flight originating in China. Law enforcement officers found that the student was carrying approximately USD75,000 (equivalent to about AUD88,000) of undeclared currency. The student had previously come to the notice of AUSTRAC due to suspicions about a large cash deposit which was possibly also linked to undeclared currency coming into Australia. The student was charged under section 53 of the AML/CTF Act with one count of failing to report movement of more than AUD10,000 in Australian currency into Australia. Designated service Failure to declare cash Individual Banking (ADIs) Physical (face-to-face) International China Accounts Money on deposit This case study also details the couriering of cash Large cash deposit AUSTRAC typologies and case studies report

30 AUSTRAC Typologies and Case Studies Report 2008 Case studies Banking (ADIs) Case 10 Skimming devices used to siphon money from accounts Members of a Canadian crime syndicate travelled to Australia to place skimming devices on ATMs around a major city. The skimming devices were used to copy card details from victims when using the ATMs, allowing the perpetrators to later siphon money from client accounts. A member of the public discovered one of the devices and immediately alerted police. It was discovered that the syndicate had conducted similar activities in other Australian states. Further inquiries revealed that the offenders responsible had started opening bank accounts within two days of their arrival in Australia and had opened a total of 10 accounts with their original passports. These bank accounts had not subsequently been used. AUSTRAC data revealed regular amounts of money being sent from Canada to the syndicate in Australia. These amounts closely correlated with hotel costs and were presumably for expenses. The offenders were linked to other groups in New Zealand and around Australia and arrests have followed in both Australia and New Zealand. Designated service Credit card skimming Individual Banking (ADIs) Electronic International Canada, New Zealand Accounts Accounts are open but remain dormant Activity is inconsistent with customer profile Bank accounts are opened shortly after a customer s arrival in Australia Regular transfer of money 28 AUSTRAC typologies and case studies report 2008

31 AUSTRAC Typologies and Case Studies Report 2008 Case studies Banking (ADIs) Case 11 Syndicate laundered money through bank accounts A syndicate involved in alleged money laundering activities was the focus of a major law enforcement investigation. To launder the funds a member of the syndicate was depositing cash into their own bank account, and on the same day transferring funds to bank accounts belonging to another member of the syndicate. Over 11 months, one syndicate member had a total of AUD264,000 deposited into their bank accounts. The individual also withdrew AUD122,000 from the same accounts at several different branches around a single metropolitan area. Over the same period another member of the syndicate withdrew approximately AUD380,000 in cash. On several occasions when money was withdrawn the same amount was deposited into accounts belonging to other members of the syndicate. The money was withdrawn in amounts usually greater than AUD10,000. As this member of the syndicate was a highly valued customer of the financial institution he was provided preferential treatment and his activity was not deemed suspicious. This member of the syndicate also received an international transfer of AUD1.7 million from the Islands. Law enforcement officials established that this individual had received over AUD6.2 million into his account from the Islands since AUSTRAC information was an important element of this investigation. AUSTRAC received multiple SUSTRs concerning these regular large cash deposits. The SUSTRs also detailed the individuals refusals to complete appropriate reporting forms. Designated service Money laundering Individual Banking (ADIs) Physical International Islands Accounts Immediate transfer of funds following cash deposits Large cash deposits into accounts (including by highly valued/trusted clients) Multiple withdrawals from branches in the same geographical location Refusal to complete required documentation Wire transfers involving an offshore tax haven The Australian Tax Office maintains a list of jurisdictions it currently considers to be tax havens. This list is available on the Tax Office website at and continues to be reviewed and updated as circumstances change. AUSTRAC typologies and case studies report

32 AUSTRAC Typologies and Case Studies Report 2008 Case studies Banking (ADIs) Case 12 Tax evaded through exporting goods A SUSTR was crucial to an investigation into a taxpayer claiming fraudulent Goods and Services Tax (GST) refunds. The taxpayer claimed that he purchased mobile telephones domestically and exported them to Hong Kong. Investigators identified that the export activity had increased significantly over time and as a result both tax credits claimed on the costs of exported goods and Business Activity Statement (BAS) refunds claimed increased. BAS statements were prepared and lodged by the taxpayer s tax agent, with reference being made to credit and debit transactions shown on bank statements. The credit transactions consisted mainly of cash deposits and incoming wire transfers which were all claimed as income received from the supply of exported goods. The debit transactions were claimed as payments for goods acquired and subsequently exported. The payments were made by cheque and internet banking transactions. When the bank statements were examined an unusual pattern was identified. Deposits and some cheque debit transactions appeared to be grouped and structured such that several deposits of similar value were made on the same day. Corresponding cheque withdrawals of similar value were also made on the same day. Investigators found that the client moved cash and cheques around company bank accounts to create transactions that gave the appearance of export trade and to support claims made via BAS. In creating these transactions, the client had also masked the withdrawal of funds from the account. Approximately AUD600,000 in tax and penalties was raised as a result of the investigation into the company s activities. Designated service Fraud Business Individual Banking (ADIs) Physical (face-to-face) Domestic Accounts Accounts cheque book facility Activity inconsistent with business profile False invoicing Financial activity occurring in unusual clusters Large cash deposits into company accounts Movement of funds between bank accounts without commercial rationale 30 AUSTRAC typologies and case studies report 2008