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$4.5 billion laundering estimate

$4.5 billion laundering estimate

THE AMOUNT of money laundered in Australia is unlikely to be known, but estimates put the figure at nearly $4.5 billion, according to the head of the Australian Institute of Criminology (AIC).…

THE AMOUNT of money laundered in Australia is unlikely to be known, but estimates put the figure at nearly $4.5 billion, according to the head of the Australian Institute of Criminology (AIC).

However, Dr Toni Makkai, AIC director, said the impact of money laundering on the economy was calculable based on a range of sources. According to AIC research, released last month, some $4.5 billion per year is laundered in Australia. Of that amount, the total value of laundered money involved in cases that proceeded was just $83 million.

However, according to Australian law enforcement estimates, $100 million in proceeds of crime was restrained, $1 billion in illicit drugs and $45 million in real estate was seized along with $40 million in cash.

However, according to the Federal Attorney-General’s website, “$11.5 billion” is laundered in Australia every year, although no attribution for the estimate is given.

The last major qualified estimate of money laundering activity in Australia was published in 1995 and put the figure at $3.5 billion. Since then, the AIC research said, the extent of money laundering has remained relatively unchanged.

“By its nature, money laundering is unlikely ever to be measured accurately, but estimates of its cost to the economy can be made using a range of data sources,” said Dr Makkai. “While Australia’s mature controls over national and international financial transactions place it at the lower end of the range of costs, the changing international financial environment and increasing sophistication of offenders mean that opportunities for new ways of money laundering continue to develop. Its potential to fund terrorist activities makes its identification and control even more pressing.”

According to the AIC research, the largest source of laundered funds was fraud, which accounted for $2.3 billion, or more than 80 per cent. The second-biggest source was the illicit drugs trade, the proceeds of which resulted in around $382 million in laundered funds each year.

The AIC research was based on responses from 21 overseas financial intelligence units (FIUs), 14 Australian law enforcement agencies and four criminologists.

While the 1995 research focused on the domestic extent of money laundering, the new research was able to garner overseas perspectives of money laundering.

The regions seen as most linked to money laundering were North America, Europe and South-East Asia. Proceeds of crime requiring laundering were most likely to be generated in Eastern European countries, with the funds transiting through Northern Europe and most often ending up in South-East Asia as laundered funds.

The responses from overseas indicated there is a net flow out of Australia of laundered money, but the country was seen only as having moderate significance as both an origin of funds and a destination for laundered money.

The AIC research added that very little is known about the amounts involved in terrorist financing, which forms part of the Federal Government’s money laundering reform program.

“It is generally accepted that some of the main methods utilised by the financiers of terrorism include the misuse of charities, the informal funds transfer sector, wire transfers, and precious and durable commodities,” said John Stamp and John Walker, authors of an paper accompanying the AIC research. “Other methods can include trade mispricing, and intellectual property crime.”

According to US research published in 2003, anomalous trade (the under or over-valuation of exports and imports to hide money laundering) represents nearly $2 billion, or 7 per cent of total trade.

However, Stamp and Walker warned against making assumptions of terrorism financing on the basis of suspect transaction reports (SUSTRs).

“Very little is known about amounts of terrorist financing, and there is some risk in assuming that a person who is the subject of a SUSTR is the same person named on government-proscribed lists. The simple match of a name does not of itself mean that the reported person is linked to the financing of terrorism. The research suggests that it would be naive to assume that no funds used for the financing of terrorism had originated in Australia.”

This article first appeared in Risk Management magazine. See www.riskmanagementmagazine.com.au

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