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Australian Federal Police - Platypus Journal/Magazine |
Pacific rim countries meet in Vancouver to fight money laundering
At the end of a conference on money laundering held in Vancouver in October 2000, Inspector Kim Clark, head of the Royal Canadian Mounted Police (RCMP) Integrated Proceeds of Crime section told the Canadian media that there is an estimated $500 billion of drug money laundered worldwide every year and that an organised crime group could move billions of dollars earned from drug trafficking, gun running, child prostitution or theft into a country swallowing entire national economies in one gulp.
The conference titled Financial Crime into the next decade: balancing private and public interest attracted more than 700 government, legal,law enforcement, and related private industry professionals from Canada, the US and about 50 other Pacific Rim nations.
The four-day event, was sponsored by the RCMP, US Customs Service and US Secretary of State among others and focused on the relationship between the corporate world and that of policing, judicial and regulatory bodies involved in uncovering illicit cash transactions with their own jurisdictions and around the world.
"Globalisation is not just a trite term", Inspector Clark said, "it's a fact of life, money moves from jurisdiction to jurisdiction at the insertion of a digital code and away it goes and it can move to three or four jurisdictions in 20 minutes".
Australian agencies represented included the National Crime Authority, Queensland's Criminal Justice Commission and the AFP. Federal Agent Lynne Walker presented a paper outlining the Australian experience tracking illicit cash transactions. An edited version of that paper follows.
By Federal Agent Lynne Walker
Members of the Australian delegation (l to r) John Richardson (Qld CJC), Federal Agent Lesley Wright (SLO Los Angeles) and Federal Agent Lyne Walker (AFP's AUSTRAC liaison officer)
In Australia, the Financial Intelligence Unit (FIU) is an organisation that comes within the Portfolio of the Commonwealth Attorney-General. The Australian Transaction Reports and Analysis Centre (AUSTRAC), is an entity which operates from its own premises and not from within any other law enforcement establishment, so therefore retains a neutral position between the financial sector organisations and law enforcement agencies that it deals with.
AUSTRAC, or the Cash Transactions Reports Agency (CTRA), as it was first known, came into being with the enactment of the Cash Transactions Reports Act 1988. This act is now known as the Financial Transaction Reports Act (FTR Act).
In the 1970s and 1980s various royal commissions exposed links between criminals who engaged in major tax evasion, fraud and organised crime and the money laundering techniques they used. This was not peculiar to Australia. By the mid 1980s there was growing disquiet regarding the size of the money laundering industry globally.
In the late 1980s, Australia enacted a package of legislation to attack the money laundering and the criminal activity generating the proceeds of crime. These included the Proceeds of Crimes Act 1987, Mutual Assistance in Criminal Matters Act 1987, the Cash Transaction Reports Act 1988 (now known as FTR Act 1988) and the Financial Transaction Reports Act 1988.
Objects of the Act
The principal object of the FTR Act is to facilitate the administration and enforcement of taxation laws. It also aims to facilitate the administration and enforcement of laws of the Commonwealth and of Territories (other than taxation laws) and to make information available to State authorities to facilitate administration and enforcement of the laws of the States.
The Financial Transaction Reports Act provides for monitoring of currency movements within Australia, and into and out of Australia. it requires reporting by cash dealers of significant cash transactions, suspect transactions, international funds transfers and aims to eliminate false name accounts, tax evasion including international profit shifting, money laundering, and financial and corporate fraud and crime.
Cash dealers are required to report cash transactions of $10,000 or more in Australian currency, or the equivalent of $10,000 or more in foreign currency.
They are also required to report international funds transfer instructions of any amount transferred into or out of Australia or any other suspect transactions.
While not considered cash dealers under the definition of the Act, solicitors must report to AUSTRAC cash transactions of $10,000 or more entered into by or on behalf of the solicitor in the course of his/her practising as a solicitor.
Included in the definition of cash dealers under the Act are financial institutions, financial corporations, insurance companies and intermediaries (including motor vehicle dealers), securities dealers and futures brokers, trustee or manager of unit trust, bullion sellers, firms that deal in travellers' cheques, money orders and remittance dealers, cash carriers, casinos and gambling houses, TABs, on course totes and bookmakers.
Members of the public are required to report to authorities if they are carrying AUD$10,000 or more in cash or foreign equivalent into or out of Australia and, or mailing or shipping AUD$10,000 or more or foreign equivalent into or out of Australia.
Following the commencement of the Act, the financial year 1989-90 was spent in the planning and development of the new agency. The agency did not become fully operational until the financial year 1990-91. Computerised access to the data collected under the provisions of the Act was made available to the Australian Taxation Office (ATO) and law enforcement agencies (LEAs), both Commonwealth and State.
Apart from the online access to data, the ATO and LEAs were provided with Suspect Transaction Reports (SUSTRs) through direct dissemination from the agency. After cursory examination by the agency, these reports were sent "raw" to the ATO and LEAs with no value added. In the year 1990-91, SUSTRs totalling 8135 were generated, and were referred to one or more of the agencies allowed access to the data. The ATO received 6605 and the AFP 3696 reports.
Generally speaking, the agencies receiving these reports were ill equipped to deal with them. For example, the AFP employed a method whereby the reports were sent to a centralised area in its national headquarters. There the reports received were logged and further disseminated to the various regional areas according to the geographic location of the activity. On receipt in the regions, again, they were registered with a regional file reference and all then sent to the fraud division for investigation. The files were then allocated to case officers within the division at random. Most were treated with little or no priority due to the extra resources required to establish that a criminal offence had been committed.
In its 1991-92 annual report AUSTRAC published figures indicating that 90 per cent of the SUSTRs received had been disseminated to one or more of the agencies authorised to receive them, less than 10 per cent were given immediate attention.
One of the strategies employed to address this problem was the implementation of a joint agency analysis unit, the AUSTRAC Analysis Unit (AAU). It was chaired by the director of AUSTRAC and included senior representatives from the ATO, AFP, National Crime Authority (NCA) and Australian Customs Service (ACS). SUSTRs received, were initially assessed by AUSTRAC staff and those that were considered most significant were provided to the AAU. The individual agency representatives would then examine their own intelligence sources to evaluate the SUSTR's value and make recommendations as to which agency should investigate. This type of approach was the precursor to the current system employed by the NCA Agio Joint Task Force.
It was at this time that the AFP provided an officer to work permanently on-site at AUSTRAC. This was considered as highly advantageous by AUSTRAC clearly seeing the benefits of having a law enforcement advisor "on tap".
While the accessing agencies were still coming to terms with their new intelligence source, a Senate review was conducted. One of the findings was that law enforcement needed to do more with the data generated by reporting under the Act.
In the formative years, AUSTRAC introduced the system of holding regular meetings with both accessing agency representatives (client liaison meetings), and the financial sector representatives (provider advisory group meetings) to enhance the working relationships needed for them to fulfil their aims. Through this cooperative approach AUSTRAC was able to make improvements to its data delivery systems both incoming and outgoing. This was achieved as a result of a mutual appreciation of benefits and difficulties encountered on all sides, FIU, LEA and financial sector.
Automated monitoring systems were invoked capable of producing "networks" of transactions fitting profiles for unusual patterns of activity. A team of analysts was employed by AUSTRAC to examine these "networks" and after drawing in any other associated transactions not caught by the automated system, the analysts created assessments of the data. This pro-active approach provided AUSTRAC with the opportunity to disseminate information to their clients, which they might not otherwise have found for themselves. AUSTRAC's reputation as a valuable intelligence source was heightened in the process not in opposition to other sources available, but rather as part of an intelligence package that should be used routinely. Law enforcement agencies responded by introducing programs designed to raise the awareness of their officers to the benefits of using the database more actively in their investigations. Protocols and Memorandums of Understanding were established between LEAs and AUSTRAC to govern the dissemination and use of the data and in particular the provisions of the FTR Act in respect of SUSTRs. Another important element was the obligation upon LEAs to provide a quarterly feedback report on the usage of FTR data in their operations. This feedback being essential to AUSTRAC in demonstrating to Government and others the positive effect of the reporting regime.
The AUSTRAC database currently contains more than 50 million reports including; Suspect Transaction, International Currency Transfer, Significant Cash Transaction reports and International Funds Transfer Instructions.
This FTR data is available to the following agencies:
• Australian Taxation Office
• State Police (7 jurisdictions)
• Australian Federal Police
• NSW Crime Commission
• Australian Securities & Investment Commission
• Criminal Justice Commission (Qld)
• Australian Customs Service
•
• Australian Bureau of Criminal Intelligence
• National Crime Authority Police Integrity Commission
• Independent Commission Against Corruption (NSW)
• State Revenue Authorities (8 jurisdictions)
• Australian Security Intelligence Organisation
The Relationship - how it works today
• All agencies listed above are invited by AUSTRAC to attend regular meetings for information sharing about crime trends and the application of AUSTRAC data to assist investigations.
• Law enforcement officers may request alerts to be placed in the AUSTRAC system and/or the application of macro searching tools through their local PLS team member.
• AUSTRAC's International MOUs with other Financial Intelligence Units can be also be activated at the request of law enforcement officers.
• Prosecution support is provided in cases involving an International Currency Transfer Report.
• Outposted PLS team members work at law enforcement agency offices in various States to assist operational teams and provide database training and to present general awareness sessions for analysts, investigators, supervisors and executive regarding benefits of integrating financial intelligence into investigations.
Since the years 1994-95 AUSTRAC has employed automated monitoring systems to screen the database for unusual financial activity patterns. The first program of this type was called ScreenIT. In 1994, a joint task force named the Agio Task Force was formed within the legislative framework provided by the National Crime Authority Act 1984. It took on the tasks of evaluating and developing the networks produced by the AUSTRAC system.
The NCA Agio Task Force comprises representatives from the NCA, ACS, AFP, ATO and AUSTRAC. In addition, these representatives are provided with access to the databases of the Australian Bureau of Criminal Intelligence and Australian Securities and Investment Commission which could be described as silent partners. The Task Force's role is to examine the unusual financial activity in the collected AUSTRAC reports and apply intelligence gathered from the other sources available to each agency representative. The information shared within the Task Force is used to identify whether money laundering and associated criminal activity may have caused the financial activity.
The management group of the Task Force then considers the conclusions drawn by a working group and decides which agency/agencies should receive the disseminated information for further investigation. Apart from matters which are selected to go through the Agio working group process, the working group manager may suggest direct dissemination by AUSTRAC to a particular agency during screening, if that is a more appropriate course of action. This would occur in cases where the working group manager was aware of a current operational interest by an agency in particular entities.
Advantages of the task force approach are:
• the ability to apply a number of different intelligence sources to a case quickly and efficiently;
• the promotion of cooperation between agencies;
• the reduction of duplication of effort by different agencies working independently of one another, and
• the quick identification of financial activity linked to current operations across the different agencies and aiding in the information flow.
Law enforcement role in other AUSTRAC relationships
With its access to an AFP officer on-site, AUSTRAC has been able to incorporate a law enforcement perspective into its meetings with the cash dealer groups represented in the Provider Advisory Group setting. This helps AUSTRAC to address any concerns raised by cash dealers at those meetings as to the use of the data they are obliged to report.
Another way that the cash dealer relationship is enhanced, is by way of AUSTRAC's newsletters circulated quarterly to its report providers. Law enforcement agencies play an important role in the production of these newsletters by providing feedback of cases where AUSTRAC data has been used to good effect. This provides some reassurance to cash dealers that the information they have provided has not simply gone into a "black hole" but is valued and useful.
For similar reasons as described in the cash dealer relationship, law enforcement representation is helpful to AUSTRAC in its dealings with Government also. A few examples are meetings held or committees formed by Government to address privacy concerns, the need for legislative amendment to keep abreast of emerging crime trends or to review the impact of the FTR legislation on business. LEAs can provide these groups with case examples, describing how AUSTRAC contributes to their methods of detecting and investigating money laundering and the criminal offences behind it.
Law enforcement agencies working in cooperation with their counterparts across the world, assist in marketing the services to investigators offered by AUSTRAC and agencies like it. Funding from the law enforcement cooperation program, has been made available to facilitate visits to AUSTRAC by overseas delegations of law enforcement and/or Government authorities to demonstrate the workings of the system in cases where it has been considered worthwhile. For example, where the overseas country involved is in the process of introducing it's own legislation or about to set up a financial intelligence unit (FIU).
As a contributor to international bodies such as the Financial Action Task Force on Money Laundering and the Egmont Group (an organisation of nations that have implemented FIUs), AUSTRAC can use feedback and case studies provided by law enforcement in Australia to share with their sister agencies abroad that are working on common anti-money laundering strategies. It can also demonstrate to the countries without an FIU, what they are missing and the possible ramifications.
The future directions for law enforcement agencies include developing ways of better integration of financial intelligence to police databases and investigations and the continuous education of educate more investigators, analysts and managers regarding the value to operations that can be gained from AUSTRAC data.
For AUSTRAC, the future will bring a widening access of PLS team members to LEA offices nationally and the continuous refinement of procedures in to ensure that AUSTRAC remains effective in the changing financial environment.
For Australian police agencies and AUSTRAC there is a shared future task in pressing, when necessary, for changes to Australian law that continue to attack the financial base of crime. Also ongoing will be the need to continue to offer assistance through expertise, experience and training to other nations joining the fight against money laundering.
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URL: http://www.austlii.edu.au/au/journals/AUFPPlatypus/2001/6.html