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Money laundering is the process of concealing the origin of money generated by illegal activity. It's described by the Australian Federal Police as the "lifeblood" of organised crime.
But what sort of economic impact does money laundering have in Australia and around the world? Keep reading to find out.
Quick summary
- It's estimated that money laundering costs Australia between $10 billion and $15 billion per year.
- AUSTRAC estimates that in 2020, over $1 billion was laundered through the Australian real estate market by Chinese-linked criminals.
- The United Nations Office on Drugs and Crime (UNODC) reports that between 2% and 5% of global GDP is laundered each year. That's between approximately $1.23 trillion and $3.08 trillion.
- In 2020, banks around the world were fined a total of US$10.4 billion (approximately AUD$16 billion) for money laundering violations.
- The Democratic Republic of the Congo is the country with the highest money laundering risk. According to the Basel AML Index, Australia is considered as a low-risk country for money laundering.
What is money laundering?
Money laundering is the process of "cleaning" money made from committing crimes. In other words, the money is made to look like it was generated from a legitimate source, rather than through illegal activity such as drug trafficking.
There are several methods criminals use to launder money. For example, one method is to use "money mules" to deposit illicit cash at ATMs, while another is to use a third party to purchase property on the behalf of a criminal syndicate.
How much money is laundered in Australia each year?
- The Australian Crime Commission estimates that it costs the country between $10 billion and $15 billion every year.
- The Australian Federal Police (AFP) believe billions of dollars are being laundered in Australia every year.
- The Australian Institute of Criminology estimates that serious and organised crime cost Australia up to $60.1 billion in 2020-21.
- According to the AFP, a Sydney criminal gang in 2022 was laundering $1 million every hour for three to five hours on some days.
- AUSTRAC estimates that in 2020, over $1 billion was laundered through the Australian real estate market by Chinese-linked criminals.
- In 2022, the AFP charged 74 people with 82 money laundering offences.
- AUSTRAC received 317,401 suspicious matter reports (SMRs) in 2022-23, an 8% increase on the previous year.
How much money is laundered globally each year?
Europol says it's difficult to assess the scale of money laundering globally, but it is considered to be significant. The United Nations Office on Drugs and Crime (UNODC) estimates that between 2% and 5% of global GDP (US$800 million and US$2 trillion) is laundered each year. In Australian dollars, that's between approximately $1.23 trillion and $3.08 trillion.
In 2020, banks were fined a total of US$10.4 billion dollars globally for money laundering violations.
Most common types of money laundering schemes
Money laundering methods range from the simple to the complex and sophisticated. Some common methods include:
- Money mules. Money launderers recruit everyday people to, potentially unknowingly, help them obscure the true source of their illicit funds. These mules are used to transfer money through airports and deposit it into bank accounts on behalf of criminals.
- Casinos. Criminal syndicates use illicit cash to purchase chips at a casino, gamble for a short period, then redeem those chips for cash so it appears to be from a legitimate source.
- Pokies. By feeding illicit cash into pokie machines, playing for a short period of time and then cashing out their "winnings", criminals can launder dirty money.
- Cryptocurrency. Another method is to use illicit cash to buy cryptocurrency, then send it to multiple different crypto wallet addresses to obscure its origin.
- Real estate. Criminals use cash generated illegally to buy property, often through a third party or shell corporation. Once they sell the property, it's more difficult for authorities to determine the true source of the funds.
- High cash flow businesses. This method involves funneling the proceeds of crime through a business that accepts a high volume of cash transactions, blending it in with legitimate business income.
Countries with the highest money laundering risk
The 2022 Basel AML Index assesses the risk of money laundering and terrorist financing worldwide on a scale of 0 (low risk) to 10 (high risk). The 10 countries with the highest money laundering risk are:
| 1 | Democratic Republic of the Congo | 8.30 |
| 2 | Haiti | 8.16 |
| 3 | Myanmar | 7.78 |
| 4 | Mozambique | 7.68 |
| 5 | Madagascar | 7.59 |
| 6 | Guinea-Bissau | 7.53 |
| 7 | Cambodia | 7.36 |
| 8 | Mali | 7.28 |
| 9 | Senegal | 7.05 |
| 10 | Vietnam | 7.04 |
Australia ranked 115th with a score of 3.65, meaning it has a relatively low risk of money laundering compared to the rest of the world. The United States ranked higher than the United States but below the UK and New Zealand. Finland finished bottom of the Basel AML Index with a score of 2.88.
Financial Secrecy Index
The 2022 Financial Secrecy Index ranks jurisdictions based on how complicit they are in helping individuals to hide their finances from authorities, which enables tax abuse and money laundering. Jurisdictions are given an FSI Value based on the level of financial secrecy they allow.
| 1 | United States | 1,951 |
| 2 | Switzerland | 1,167 |
| 3 | Singapore | 1,167 |
| 4 | Hong Kong | 927 |
| 5 | Luxembourg | 804 |
| 6 | Japan | 765 |
| 7 | Germany | 681 |
| 8 | United Arab Emirates | 648 |
| 9 | British Virgin Islands | 621 |
| 10 | Guernsey | 610 |
Australia ranked 37th out of 141 countries on the list with a FSI Value of 318.
High-profile money laundering cases in Australia
In October 2023, an AFP-led investigation resulted in seven people being charged for allegedly laundering almost $229 million. The investigation was into the Changjiang Currency Exchange, which the AFP alleges is secretly run by the Long River money laundering syndicate.
The AFP alleges that the remittance service had handled more than $10 billion worth of transfers over the past three years. While the majority of that money was transferred on behalf of legitimate customers, the AFP claims that the exchange also allowed criminals to transfer $229 million of unlawfully-obtained money in and out of Australia.
Four Chinese nationals and three Australians were arrested in Melbourne, while more than $50 million worth of property and vehicles were also seized.
In a separate scandal, casino giant Crown Resorts was fined $450 million in May 2023 for failing to comply with anti-money laundering laws. This came after AUSTRAC launched legal proceedings against Crown the previous year, alleging that $69 billion was laundered through its casinos over a period of five years. Crown admitted that it did not have appropriate systems in place to mitigate money laundering and terrorism financing risks.
AUSTRAC also launched legal proceedings against Star Entertainment in November 2022, alleging the casino operator failed to comply with Australia's anti-money laundering and counter-terrorism financing laws. It alleged that Star permitted their customers to move money through non-transparent payment channels and did not understand whether there was a risk that the source of funds moving through those payment channels was illicit. The case is ongoing.
