Tag Archive for: money laundering

Australia’s casinos a hotspot for global money-laundering operations

The Bangkok office of the United Nations Office on Drugs and Crime warned in recent reports that Australia is part of organised crime networks involved in trafficking in wildlife and timber, people-smuggling and money-laundering. Counterfeit medicines are also a global issue. Much of the laundered money in Australia is being used in casinos.

Indeed, the power of casinos in a country is a good indicator of the extent of money-laundering and serious crime networks according to the Environmental Investigation Agency, a non-government organisation in the UK.

The recent allegations against Crown Resorts related to money-laundering and people-smuggling are one indicator of Australia’s involvement in this growing network in Southeast Asia. The Australian government has a good record in taking crimes seriously when they directly affect public health, but it seems reluctant to confront organised crimes conducted through casinos.

Last March, Australia called on the G20 nations to end wet markets selling wildlife due to the threat to human health. But organised crime allegations brought against Crown in Melbourne and Perth appear to have received less attention from authorities, and some experts question the regulators’ ability to deal with the scale of the problem at casinos. Earlier this month, the Independent Liquor and Gaming Authority found that Crown was not fit to operate its new casino at Barangaroo in Sydney due to ‘poor corporate governance’ and ‘deficient risk-management structures’ after a year-long public inquiry.

Organisations like the Environmental Investigation Agency have been investigating the role casinos play in crime in general and, specifically, in money-laundering and the wildlife trade. According to Julian Newman, campaign director at EIA, ‘Money laundering is definitely linked to the illegal wildlife trade, but there are few cases of successful prosecution of wildlife traffickers for financial crimes.’ According to the EIA, the Illegal wildlife trade is the fourth largest type of crime in the world after arms, drugs and human trafficking, and it generates US$7–23 billion in profits every year.

One significant trafficking case involved the Kings Roman Group casino in northern Laos. In 2018, the US government placed sanctions on Zhao Wei, the head of the Kings Roman Group. Wei and others were running a transnational organised crime group involved in narcotics, wildlife trafficking and human trafficking. The EIA says it believes wildlife trading still happens at the site.

Other casino businesses linked to wildlife trafficking can be found in Mong La on the Myanmar–China border. Border towns like these are particularly attractive to traffickers due to their ‘territorial ambiguity’, which can lead to lawlessness and corruption, according to Newman.

Macau is known to be a hub for money-laundering globally. For instance, much of the laundered money allegedly used at Crown’s casinos in Australia came from mainland China, via Macau. With the strict laws on the amount of money mainland Chinese people can take out of the country, Macau is often the stop-off point to Australia where Chinese people can sell goods like watches for cash. They can then use that money to bet in casinos in Australia. New technologies such as mobile applications and cryptocurrencies have also made it easier for money to be laundered.

According to Newman, Wei was involved in the casino business in Macau before opening the casino in Laos. He also ran one in Mong La. These casinos are global businesses and it’s clear Australia hasn’t viewed such crimes as serious enough to warrant better regulation or stronger enforcement action.

Corporate governance expert Thomas Clarke from the University of Technology Sydney believes Australian politicians are inclined to see casinos and banks ‘as great money-making institutions to be supported in the interests of the local and national economy’. He says they often don’t want to know about criminal activities as a result, a concerning sign for Australia’s security.

Newman says one way to combat money-laundering and related crimes is for global financial institutions, including multinational banks, to make greater efforts to identify and submit suspicious transaction reports to the relevant authorities. This would make it harder for wildlife criminals to move money through the formal banking system.

Clarke isn’t ready to give up on the regulator, AUSTRAC, which was set up to monitor financial transactions in a wide range of crimes, including money-laundering. The agency plays key role in finding the main organisations behind the criminal networks using casinos.

‘AUSTRAC has proved the most determined of the Australian regulators in the actions against Commonwealth Bank and Westpac and the large fines they imposed’, Clarke says. AUSTRAC has reported on the scale of recent criminal activities being conducted through banks and businesses like casinos, finding that these organisations were financial arteries for the crimes.

Even if Clarke’s belief in AUSTRAC is well founded, it’s clear Australia has a huge challenge ahead to deal with the scale of crimes being conducted through casinos. An inquiry finding a company not fit to run a casino due to governance issues seems an understated response at best when there’s evidence of links to serious organised crime. It’s significantly worrying for Australia’s security.

As Newman says: ‘The bosses in these crimes aren’t untouchable and the tools to go after them are increasingly available. We need to follow their money to put them behind bars.’

Charities and terror financing: we need to remain vigilant

The recently released national risk assessment on money-laundering and terrorism financing in Australia’s non-profit organisation (NPO) sector found that the risk of terrorism financing has fallen from high to medium, compared to the regional terrorism financing risk assessment released just last year. However, that doesn’t mean that NPOs or government authorities should be complacent. The risk that money given to a good cause ends up in the pockets of terrorists stills exists, and the consequences are serious—for communities and NPOs themselves.

The medium risk rating is based on intelligence held by government, suspicious-matter reporting to AUSTRAC—28 reports with a value of $5.6 million between 2012 and 2016—and the number of NPOs linked to persons of interest identified during counterterrorism investigations.

The assessment explains that the lower risk rating ‘reflects shifting terrorism financing behaviour’ towards self-funding activity and away from historical methods that include NPOs being used to raise and send large amounts of money to support large global terror organisations such as al-Qaeda.

But the misuse of NPOs is still an issue in the contemporary terrorism financing environment. Last year the head of World Vision in Gaza was charged by Israeli authorities with allegedly diverting funds to Hamas. Indonesia’s financial intelligence unit, PPATK, identified $500,000 of charitable donations raised in Australia and transferred to Indonesia for terrorist recruitment, training and weapons procurement, and to support the families of terrorists who died. Members of an Australian charity are under investigation for alleged links to Islamic State. One of them was arrested on terrorism charges, including fighting, fundraising and recruiting. And the risk assessment itself notes the ‘deliberate and prolonged attempts’ to infiltrate three separate NPOs in Australia by three different individuals, who then diverted funds to support terrorism once in a position of trust.

Exploiting NPOs can be very lucrative for terrorist groups. NPOs can generate large amounts of money. The assessment notes that Australian registered charities have an annual income of over $134 billion and send $1.5 billion overseas each year in donations and grants. Siphoning off even a small proportion of that money to terrorist groups would boost their capabilities and cause serious harm to communities.

The consequences of an NPO being implicated in terrorism financing are also serious for the individual NPO concerned, and the sector generally. Reputational damage and loss of public confidence could lead to a serious drop in donations. In the World Vision case, the Department of Foreign Affairs and Trade suspended funding to the charity, having given more than $5 million in the previous three years. Obtaining or retaining banking facilities may be threatened by risk-averse banks seeking to de-risk.  The Australian Charities and Not-for-profits Commission (ACNC), the sector regulator, can revoke NPOs’ registration. And regulatory or law enforcement action could follow. Those negative consequences ultimately flow on to the beneficiaries of the NPOs work.

So what should the sector and the government do to protect NPOs from being exploited to fund terrorism?

Fortunately, the government is heading in the right direction. The ACNC, which co-authored the risk assessment with AUSTRAC, is doing good work in overseeing and providing outreach and education to the sector. The ACNC’s work includes internal forensic accounting capacity, and it works closely with the Australian Taxation Office, the Australian Federal Police and AUSTRAC.

This cooperation and information-sharing will be further enhanced thanks to a bill before parliament to make the ACNC a ‘designated agency’ under the Anti-Money Laundering and Counter-Terrorism Financing Act. NPOs are not directly covered under the act, and AUSTRAC’s visibility of NPO financial activity is limited to where they interact with the regulated banking and financial services sector—for example, when making bank deposits or international funds transfers. As a designated agency, the ACNC will have direct access to AUSTRAC information, enabling it to better detect and act against terrorism financing and other crimes.

The terrorism financing risk profile of individual NPOs differs depending on their activities. For example, those working in countries with a significant terrorist problem are at greater risk. The risk assessment identified Australia’s higher-risk terrorism financing NPO subset, which will allow for better targeted monitoring, outreach and education.

NPOs also need to take steps to protect themselves. Worryingly, the risk assessment made clear that many NPOs don’t understand the terrorism financing risk they face. So they should seek to better understand those risks, leveraging the ACNC’s support. They should ensure that effective due diligence is undertaken on employees, volunteers, contractors, partners and beneficiaries. And they should maintain strong internal controls, recordkeeping, and training and monitoring of staff. This may be challenging for smaller NPOs with limited finances and corporate governance expertise. However, the failure to implement appropriate controls that enables terrorism financing can be immensely damaging to NPOs and their beneficiaries.

Charities and NPOs undertake vital work. It’s important for them, the sector and their beneficiaries that they’re not undermined by terrorist groups and their financiers.