17 May 2007
It is estimated that the value of money laundering activities in Australia could be as high as $11.5 billion per annum , said Aub Chapman, Director of Aub Chapman Consulting in a presentation at the Institute of Chartered Accountants NSW Business Forum earlier this week.
“Estimated to be between 2% and 5% of global GDP , money laundering is a global issue and professionals in the financial services sector, such as accountants, need to be vigilant in avoiding becoming involved, even unwittingly, in money laundering schemes”, Chapman said.
Money laundering is a process whereby criminals attempt to hide and disguise the true origin of the proceeds of their criminal activities, thereby avoiding prosecution, conviction and confiscation of the criminal funds. The three stages of money laundering involves placing the proceeds of crime into the legitimate financial system, moving those funds around to disguise the origin and integrating the funds into the legitimate financial markets.
The possible consequences of money laundering include: - Risks to the soundness and stability of financial institutions and financial systems
- Increased volatility of international capital flows
- Having a dampening effect on foreign direct investment if a country’s commercial and financial sectors are perceived to be vulnerable to money laundering.
“Since 9/11 there has been a significant increase in political pressure to combat money laundering and the financing of terrorism. Terrorist financing often involves the diversion of “clean” or legitimate funds such as donations to charitable causes being used to support terrorist activities, alternatively, the proceeds of crime, that is “dirty funds” are used as a means to the same end” Chapman said.
In order to address the issues around money laundering and the financing of terrorism, the Australian government has introduced the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. The Act moves Australia from a reporting-based regime to a risk-based regime and requires organisations to proactively assess the money laundering and terrorist-financing risks associated with their activities and customers and then decide upon the appropriate way in which to monitor and manage those risks.
Under the provisions of the Act, an organisation cannot commence to provide designated services unless it has developed and implemented an AML/CTF program. The program must be designed to:- Identify, mitigate and manage money laundering and terrorists financing risks and changes in these risks
- Provide employee risk awareness training
- Appoint an AML/CTF Compliance officer at management level
- Be subject to oversight at Board level
- Take into account any feedback from AUSTRAC
Affected organisations must also comply with customer identification obligations and put in place ongoing due diligence processes such as transaction monitoring for the purpose of identifying suspicious matters. It is also imperative that organisations maintain appropriate records regarding transactions, customer information and due diligence assessments.
“The AML/CTF Act is aimed at combating money laundering and terrorist financing in Australia, but accountants will need to ensure that they have the training and resources to comply with the obligations. This is not only critical in relation to their own businesses, it is also critical to the functions and services accountants provide in support of their clients’ businesses”, Chapman said.
“The bottom line is – your business, your customers, your products equal your responsibility. If it is proven that an accountant has or is involved or implicated in money laundering or terrorism-financing schemes, significant penalties may apply and the organisation’s reputation may be damaged. There is also the potential for significant remediation costs,” Chapman concluded.
Footnotes:- According to documents submitted to Federal Parliament in 2006
- This estimate is based on IMF figures published in 1996
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