AUSTRALIAN ANTI-MONEY LAUNDERING LAWS ARE FAILING TO ADDRESS GROWING LOOPHOLES IN THE PROPERTY AND ENTERTAINMENT SECTORS

BY BRITTANY CAIRNS

Money laundering, which saw over 82 offences and 70 people charged in 2022, has had detrimental effects on the Australian economy and its citizens.1 Urgent action has been called to address the significant loopholes in the system that the current Anti-Money Laundering and Counter-Terrorism Financing (‘AML/ CTF’) frameworks are not tackling. Criminal groups have escaped liability and imprisonment due to loopholes in the property and entertainment markets. Individuals have not been charged from the extensive enquiries into Star Entertainment Group and Crown Resorts Ltd, where billions of dollars of illicit funds were injected into their firm's accounts. ‘Dirty’ money entering casinos and the property market continues to rise. The Australian Crime Commission estimates that organised crimes, including money laundering, cost around $10-15 billion per annum.2 Over $1.5 trillion of illicit funds is laundered worldwide each year, with $200 billion in Australia.3 Money laundering will continue to rise without immediate action. On 20 April 2023, the Attorney-General announced a public consultation on AML/CTF reform.4 The significant inquiries affecting Crown Resorts, Westpac Banking Corporation, and Star Entertainment Group have catalysed urgent calls for more action, particularly on charging company directors and executives.

MONEY LAUNDERING, AUSTRAC AND THE AML/CTF FRAMEWORK

Money laundering is defined as disguising criminal proceeds to make them appear legitimate. It involves the process of making illegally obtained funds appear ‘clean’ in order to hide illicit proceeds ors ‘dirty funds’. Offenders pass the funds through a series of transactions and disguise their trustworthy source. They often use casinos and the property market as a ‘vacuum’ to hide the ‘dirty funds’. For example, according to the Australian Transaction Reports and Analysis Centre (‘AUSTRAC’), over $69 billion was laundered through Crown Resorts over a 5-year period.5

AUSTRAC, Australia’s money laundering agency, is the Australian government agency responsible for disrupting and detecting the ‘criminal abuse’ of Australia’s financial system, aiming6 to protect the public from organised criminal activity. The question is whether AUSTRAC and the current AML/CTF frameworks are doing enough to minimise money laundering in Australia.7 8 Are the current laws sufficiently addressing the loopholes in property and casino markets?

MONEY LAUNDERING AND THE CRIMES ACT 1900 (NSW)

Pursuant to s 114B of the Crimes Act 1900 (NSW), a person commits a money laundering offence if he/ she deals with money or other property that are proceeds of crime.9 Importantly, under s 114B(c), the person must know that the respective money or other property is derived directly or indirectly from an unlawful activity.10 Currently, there are urgent calls for the penalties of money laundering to increase, particularly for company directors and executives who reasonably ought to know money laundering has been occurring within their firm. Under s 193B, a person who deals with the proceeds of crime knowingly and intends to conceal the proceeds of crime is guilty of a money laundering offence. The maximum penalty for this is 20 years. However, this is rarely given. Pursuant to s 193B(2), a person who deals with crime knowingly is guilty of an offence with a maximum imprisonment of 15 years. Recklessly dealing with proceeds of crime has a maximum imprisonment penalty of 10 years. These laws may sound reasonable; however, the increasing loopholes are allowing for offenders to escape liability. For example, over $69 billion was illegally funded into Crown Resorts for five years before AUSTRAC filed an enforcement action. The Crown Resorts inquiry shows that no directors have been charged or held accountable for their negligent or reckless conduct in this scandal. Are the current laws failing to address director accountability?

¹ Australian Federal Police, ‘AFP targets the lifeblood of organised crime in 2022’ (Media Release, 17 December 2022) < https://www.afp.gov.au/news-media/media-releases/ afp-targets-lifeblood-organised-crime-2022>.

² Diane Heriot, ‘Money Laundering in Australia’, Parliament of Australia, (Web page, 22 November 2011) <https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/FlagPost/2011/November/Money_Laundering_in_Australia>.

³ Ibid.

4 Attorney’s General Department, ‘Modernising Australia’s anti-money laundering and counter-terrorism financing regime’ Australian Government: Attorney-General’s Department, (Web page) <https://consultations.ag.gov.au/crime/aml-ctf/>.

5 Nathan Lynch, ‘AUSTRAC claim alleges A$69 billion laundered through Crown Resorts’ Thompson Reuters (Web page, Tuesday 8 March 2022) <https://insight.thomsonreuters. com.au/business/posts/austrac-claim-alleges-a69-billion-laundered-through-crownresorts#:~:text=As%20a%20result%2C%20a%20total,Chinatown”%2C%20and%20 Alvin%20Chau>.

6 AUSTRAC, ‘AUSTRAC Overview’, Australian Government: AUSTRAC, (Web page) <https://www.austrac.gov.au/about-us/austrac-overview >.

7 Ibid.

8 Diane Heriot (n 2)

9 Crimes Act 1900 s 114B (‘Crimes Act’).

10 Ibid, s 114B(c).

Crown Resorts And Star Entertainment Group Scandals

AUSTRAC filed its first enforcement action against Crown Resorts in March 2022. Crown Resorts allegedly had over $69 billion laundered into the business over a five-year period.11 According to AUSTRAC, the Crown ‘failed to maintain a compliant AML/CTF program to identify, mitigate and manage the risk’ of services being misused for money laundering.12 Following this scandal, Australian Securities and Investment Commission (‘ASIC’) stated that ’10 former Crown Resorts directors and senior executives will not face charges’ for breaching director duties.13 The anti-money laundering laws are clearly not holding those accountable despite ss 114B and 193B being implemented in the Crimes Act.14

Meanwhile in November 2022, AUSTRAC filed its case against both Star Sydney and Star Queensland in the Federal Court.15 The casino group ‘seriously and systematically’ breached federal law. International groups travelling on ‘junket tours’ laundered over $125 billion between November 2016 and October 2020. The NSW inquiry into the Star Entertainment Group discovered ‘triad gangs’ were involved in ‘large scale money laundering activities’.16 These scandals called for significant reform to current anti-money laundering laws to eliminate loopholes, particularly in the casino industry.

The Australian Property Market Becoming A Destination Of Choice

Money laundering activities have become increasingly evident in the Australian property market. The ‘weak and outdated’ regulations are allowing money laundering in the property market, ultimately 'locking’ Australians out of purchasing homes.17 The property market is becoming a ‘destination of choice’ for money laundering activities.18 The property market loophole has become a problem due to AUSTRAC being unable to detect financial-motivated crime. Transparency International Australia’s submission to the Senate inquiry in August 2021 mentioned how ‘a significant amount’ of money laundering activities are occurring due to AUSTRAC’s inability to use current laws to detect.19 The weak and outdated laws are causing the loopholes in the property market to increase, therefore allowing criminal groups to escape.20

Time For Reform

The Crown Resorts and Star Entertainment Group scandals have sparked major calls for money laundering reform to minimise the growing loopholes to launder illicit funds. Along with the property market loopholes, urgent reform is essential to create stricter laws which prevent criminal groups escaping liability and imprisonment. On April 20 2023, the Attorney-General announced ‘public consultation’ on proposed reforms to the AML/CTF regime.21 The main objective is to ‘harden Australian businesses’ against organised money laundering activities by criminals.22 Furthermore, the reforms aim to reduce the ‘complexity’ and burden on industry. The general public has been invited to submit recommendations by June 16 2023. Recommendations for money laundering reforms may be timely and not address the significant, growing loopholes in a quick fashion. Should the government impose harsher and stricter reforms? Recommendations are a step in the right direction; however, this could be time costly, allowing criminals to continue to launder illicit funds in the vulnerable industries of property and entertainment. Furthermore, no transparent reform addresses director repercussions or harsher penalties for those involved in money-laundering activities. Directors involved in the Crown Resorts scandal have yet to be formally charged, which calls into question whether the current laws are too lenient. Hopefully, with public recommendations, stricter laws will be enforced to address these growing issues.

Conclusion

With around $10-15 billion per annum being illicitly laundered into Australia every year, urgent action and reform are essential to minimise the growing loopholes used by criminal groups.23 The extensive inquiries into the Star Entertainment and Crown Resorts money laundering scandals, in which no directors were charged, call for urgent action for harsher penalties. Despite s 114B and s 193B of the Crimes Act imposing imprisonment penalties, directors and executives associated with money-laundering practices are not held accountable.24 The law is yet to address this area, which should be considered in the public consultation papers released by the Attorney General in April 2023. However, with the Australian government's cooperation, along with AUSTRAC and AML/CTF frameworks, there is hope that the issue of money laundering can be addressed and minimised over the next few years. Ultimately, reform would hold directors, executives, and criminal groups accountable for engaging in illicit money laundering conduct.

11 Nathan Lynch, ‘AUSTRAC claim alleges A$69 billion laundered through Crown Resorts’ (n 5).

12 Ibid.

13 Elouise Fowler and Hannah Wootten, ‘ASIIC lets Crown directors, execs off the hook; AUSTRAC sues casinos, Australian Financial Review, (online, Tuesday, 1 March 2022) < https://www.afr.com/companies/games-and-wagering/austrac-takes-crown-to-court-forwidespread-aml-non-compliance-20220301p5a0kw#:~:text=The%20corporate%20regulator%20has%20told,%2470%20billion%20through%20its%20casinos>.

14 Crimes Act (n 9) ss 114B,193B.

15 Elouise Fowler, ‘Star broke money laundering laws ‘innumerable’ times AUSTRAC’ Australian Financial Review (online, Wednesday 30 November 2022) <https://www.afr. com/companies/games-and-wagering/austrac-sues-star-entertainment-for-money-laundering-20221130-p5c2fi>.

16 Ibid.

17 Christopher Knaus, ‘Widespread money laundering in property locking out Australians from owning homes’ Guardian (online, Tuesday 9 November 2021) < https://www. theguardian.com/australia-news/2021/nov/09/widespread-money-laundering-in-property-locking-out-australians-from-owning-homes-senate-told>.

18 Ibid.

19 Ibid.

20 Ibid.

21 Australian Government: Attorney General’s Department (n 4).

22 Ibid.

23 Diane Heriot (n 2).

24 Crimes Act (n 9) ss 114B, 193B.