Anti-money laundering agencies and enforcement
In this article, Partner Ian Hughes and Special Counsel Hui Ling Dean in HopgoodGanim's Dispute Resolution and Litigation practice discuss anti-money laundering (AML) agencies and AML enforcement. Our team at HopgoodGanim delivers exceptional outcomes for financial crime and corporate investigations, with Hui Ling and Ian advising on corporate anti-money laundering and proceeds of crime litigation.
The Financial Action Task Force ( FATF ), of which Australia is a founding member, is an international body that sets AML standards, and the Egmont Group of Financial Intelligence Units ( FIUs ) provides many countries, including Australia, with comprehensive guidance on prevailing AML risk indicators.
AML is enforced in Australia by various federal government agencies ( Agencies ) - Australian Federal Police ( AFP ), the Australian Crime Intelligence Commission ( ACIC ), Australian Border Force ( ABF ), the Australian Securities Investments Commission ( ASIC ), the Australian Taxation Office ( ATO ) and the Australian Transaction Reports and Analysis Centre ( AUSTRAC ).
These Agencies deal with different forms of assets and AML techniques, and each has its own unique and, in some cases, exceptional powers to detect, investigate and prosecute unlawful conduct and to freeze or seize assets.
Examples of the Agencies’ information-gathering powers include covert surveillance of telecommunications and banking transactions, compulsory examinations of individuals where there is no privilege against self-incrimination, the power to seize or demand production of physical and electronic documents from professional advisers, and multi-jurisdictional information-sharing with foreign agencies, such as Scotland Yard and the National Crime Agency in the UK, the FBI and the Department of Justice in the USA, and with foreign embassies through mutual assistance requests.
AUSTRAC is responsible for detecting, preventing and responding to criminal financial abuses taking place inside the Australian financial system and by analyses suspicious transactions which designated financial institutions, such as banks, gambling institutions and bullion dealers must report. 1
Failure to report a ‘suspicious matter’ to AUSTRAC under section 41 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) ( AMLCTF Act ) - for instance lodging with AUSTRAC a suspicious matter report ( SMR ) related to terrorism within 24 hours or a suspected money laundering transaction within three days – can attract a civil penalty of up to $22.2 million.
For instance, in 2020, Westpac was ordered to pay AUSTRAC $1.3 billion2 for failing to properly report 19,502,841 international funds transfer instructions on time pursuant to section 45(2) and failing to conduct ongoing customer due diligence pursuant to section 36 of the AMLCTF Act.
The AFP and the Commonwealth Director of Public Prosecutions ( Proceeds of Crime Authorities ) also enforce AML through the freezing and potential forfeiture of money or other assets under the Proceeds of Crime Act 2002 (Cth) ( POCA ), which specifically targets the proceeds of money laundering.
While fines alone are significant, they may not be commensurate with the true value of a proscribed transaction. Asset seizure and confiscation laws in Australia therefore attempt to capture the overall value of a transaction in order to comprehensively deter offending conduct.
A number of ‘serious offences’ defined by section 338 of the POCA pursuant to the Criminal Code Act 1995 (Cth) ( Code ) also give rise to a civil cause of action under the POCA.
Section 18 of the POCA authorises the restraint of assets suspected of belonging to parties suspected of committing a ‘serious offence’, while section19 deals with property suspected of being proceeds of an ‘indictable offence’.
A Proceeds of Crime Authority’s application to the court is almost always made without notice to the affected party and, provided it gives evidence of ‘reasonable facts supporting the suspicion’, the court has very little discretion to refuse an order to freeze the designated assets.
When applying for a restraining order, the Proceeds of Crime Authority is not required to prove that the assets are directly tainted by the offence. An asset can be frozen as long as some form of ownership or interest in the asset can be linked to the suspect. This can (and often does) result in untainted assets being restrained, as well as the assets of family members or related businesses that may appear to have been combingled with designated assets belonging to the suspect.
Property held, pursuant to a trust, can be restrained pursuant to section 18(c) of the POCA if the Proceeds of Crime Authority can prove it is ‘effectively controlled’ by a suspect. ‘Effective control’ is broadly defined in section 337 of POCA and includes having a legal or equitable right, power, or privilege with respect to property.
Mere possession of funds or an asset that may have been derived from the proceeds of crime (including any benefit or profit from engaging in sanctioned activities) can also enliven the POCA so that a Proceeds of Crime Authority can commence civil proceedings to restrain, trace and even confiscate assets pursuant (among others) to section 47 or 49 of the POCA.
There is no need for a concurrent criminal proceeding when a Proceeds of Crime Authority commences civil proceedings against a party allegedly holding or dealing with proceeds of crime. The laws apply equally to an innocent party involved in a trade-based money laundering transaction.
The key difficulty for the vast majority of Australian businesses is that, although Agencies are likely to be monitoring ‘suspicious matters’ and preparing their cases in the background, an implicated business may only play a small role in the supply chain in which the transaction occurs, and therefore have little experience in the detection of suspicious transactions or any systems in place to determine whether or not they are legitimate.
Businesses may be totally unaware of their involvement in trade-based money laundering until an Agency knocks on their door or they find their assets or accounts frozen by an ex parte court order.
In early February 2023, the AFP, without notice, being a Proceeds Authority, executed restraining orders to restrain $150 million in assets throughout Sydney pursuant to the POCA. The assets are suspected of being proceeds of crime through money laundering. The operation was allegedly part of a $10 billion Chinese-Australian money laundering operation to transfer funds to ‘safe jurisdictions’ to purchase luxury assets such as $47 million land acreage near Sydney’s second airport and blue chip property portfolios.
The Chinese-Australian operation allegedly laundered funds through legitimate banking systems via multiple jurisdictions to give the appearance of legitimacy, before purchasing luxury assets in Australia.
An understanding of transactional and corporate red flags is imperative in identifying and complying with Australia’s AML laws to avoid outcomes of this kind.
Find out more about HopgoodGanim's Dispute Resolution and Litigation practice. Our dispute resolution team includes both general commercial litigation practitioners as well as industry expert practitioners in the areas of banking and finance, intellectual property, technology, digital assets, resources and energy, construction, hospitality, environment and planning, taxation, employment law and property.
The team covers financial crime and corporate investigations, with Hui Ling and Ian advising on corporate anti-money laundering and proceeds of crime litigation. All of our practitioners are focused on helping clients achieve exceptional outcomes.
This article is part of our content series, 'The money laundering deck: AML and counter-terrorism financing laws'. The series uses Russia as a case study to provide an analogy for how businesses can be impacted by AML and counter-terrorism financing laws while operating in Australia. Read the related articles in the series here: