Australia has become a haven for international flows of laundered money.
India has joined the list of countries asking for help in returning corruption money being laundered in Australia. But the chances of this happening are not too high.
“Australia has a history of refusing to extradite people known to have been involved in corrupt practices. They can also open bank accounts, run a business and get a job,” according to Professor Jason Sharman from Griffith University in Brisbane.
Of course a major source of this money is from China, where 180,000 party members have been disciplined (and some killed) in the on-going anti-corruption drive.
“Between sixteen and eighteen thousand cadre fled the country between 1993-2008, taking 120 billion with them… China has given Australia and the USA lists of a hundred people each, to request return of the money.”
“One problem with this is that neither country has extradition treaties with China. Also, often what was legal when the money was taken out is now illegal, making it difficult to justify an extradition.”
“Operation Fox-hunt by the Chinese government, where malefactors had a period of leniency to return with the money to China, has also failed after deals made overseas by the Chinese government where not honoured when the person returned,” said Professor Sharman.
“However Australia has a lot of laws in relation to corrupt practices overseas and has the legal right to close the accounts and pursue both the bankers and the criminals at any time it wants. AUSTRAC, the Australian government institution meant to enforce these laws through controlling the banking sector has never taken action. It also blames the Australian Federal Police (AFP). The AFP blames AUSTRAC,” said Professor Sharman.
The money tends to be laundered in three ways. Real estate, lawyers’ trust funds and wire transfers. Casinos also help. In PNG, a major supplier of black money to Australia, the police band has more money than the anti-fraud squad and, with the Manus Island deal, there seems to be no appetite for pursuing the money by the previous two Australian governments.
According to a paper by Transparency International by John Chevis, a Visiting Fellow of the Centre for Governance and Public Policy at Griffith University, and Gill Donnelly, a Certified Financial Crimes Investigator, it would appear that AUSTRAC has never sanctioned the banks, the casino or the remitters. In fact, despite the considerable evidence that money laundering has occurred through our financial institutions, AUSTRAC’s enforcement action appears all but non-existent. In addition to never having prosecuted any of the approximately 13,900 entities it regulates for any offences at all, AUSTRAC has only ever issued two infringement notices in 25 years, deregistered a handful of remitters, obtained a number of enforceable undertakings, and written a large number of letters.
According to Professor Sharman, “What is interesting is that the there is a change in the banking community in its attitude to money laundering, as individual bankers may be imprisoned for the act. This is far ahead of the government’s attitude of ‘see no evil’. The bankers are well aware of the laws and have started closing down accounts since 2013. The banks are, however reluctant to talk about it”.
“As for real estate, the agent is under no obligation to inform the authorities if the they think the money for the property is black or not. Finding out who owns what is a matter of going through all the title deeds,” said Professor Sharman.
“It may just be a matter of time before the press makes a fuss about it and that will lead to politicians acting. At present Switzerland, the USA and Britain are doing more than Australia to counter the flow of black money. Historically it was the end of the Cold War that saw the beginning of NGOs and governments not needing to placate anti-communist crusaders, some of whom happened to be very corrupt. De-colonisation and privatisation of law organisations is also affecting people’s perceptions of black money.
Professor Sharman also made clear that he does not believe the flow of corrupt money out of other countries has not seen the corruption of the Australian political system.
However, according to the Transparency International paper, in a formal submission to a recent Parliamentary inquiry into financial-related crime, AUSTRAC claimed that it monitors the compliance of its regulated population with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) and takes enforcement action where necessary in relation to breaches of the Act.
When questioned on this however, the then CEO, John Schmidt, admitted that AUSTRAC had never initiated any prosecutions. He noted that AUSTRAC was not a law enforcement agency.
This constricted view of ‘regulation’ is similar to that taken by the Office of the Comptroller of the Currency (OCC) in the United States (US) which was criticised for its approach to ‘regulation’ while allowing banks like HSBC to launder billions for drug cartels and circumvent economic sanctions.
The OCC’s letter-writing ‘merry-go-round’ method of regulation stopped only when the U.S. Justice Department stepped in. It started fining banks such as HSBC, to which it issued a USD 1.9 billion deferred prosecution fine. The official government response to the media reporting in 2013 was not to address the substance of the issue, but rather to comment that Australia had a robust framework to deter and detect money laundering, and to ensure that Australia is not a safe haven for the proceeds of corruption.
The Transparency International paper concludes that clearly a ‘robust’ system doesn’t allow a billion dollars of criminal Chinese assets to flow into our country, and would ideally prevent wealthy and powerful foreign criminals establishing themselves in Australia.
Christopher Kennedy is a free-lance journalist based in Perth. He has a degree in Asian Studies and started and moderated Australia Asia Internet for five years. This article can be republished with attribution under a Creative Commons Licence.