It is described as "showing how money laundering and other serious offences pose a significant threat to Australian businesses and the community".
The AUSTRAC typologies and case studies report 2012 includes 21 real-life case studies featuring an array of offences, including large-scale tax evasion, advance fee fraud and investment scams, identity theft and drug trafficking.
“These case studies show that Australia’s strong economy makes us a tempting target for transnational and high-tech crime” ...
“It also confirms that when government and industry work together we can catch the criminals responsible.”
AUSTRAC analyses financial information and shares this information with a range of government law enforcement and other agencies, which has led to asset seizures and the arrest and conviction of criminals.AUSTRAC's 2011 Money laundering in Australia report identified key characteristics of money laundering in Australia, including -
- Intermingling (or co-mingling) legitimate and illicit financial activity. This process of reinvesting criminal proceeds and providing a cover for criminal enterprise (for example, through cash-intensive businesses and front companies) is a well-established money laundering methodology.
- Engaging specialist money laundering syndicates. Specialist syndicates, based in Australia and overseas, are providing specific money laundering services to domestic and international crime groups operating in Australia.
- ‘internationalisation’ of the Australian organised crime environment. There is almost always an international component to the money laundering cycle for major crime groups operating in Australia.
- manufacturing companies using shell companies, cheques and secret cash payments to undertake large-scale tax evasion;
- an extensive Nigerian ‘advance fee’ fraud, where more than 20 Australian victims lost millions of dollars; and
- a criminal syndicate that stole the identities of victims to perpetrate a multi-million dollar superannuation fraud.
In discussing 'emerging vulnerabilities' the report comments that -
‘Digital currencies’ and so-called ‘virtual worlds’ offer opportunities for criminals to launder money due to their global reach, lack of face-to-face transactions and the convenience of using electronic commerce.
While the nature and extent of money laundering through digital currencies and virtual worlds are unknown, it is important to recognise their potential for criminal exploitation, particularly in response to tighter regulation of established or traditional financial channels.
The evolution of digital currencies has led to the development of internet-based, electronic means of transferring ‘real-world’ value. In contrast to the traditional physical currencies issued by national governments, digital currencies (such as Bitcoins, SolidCoins and Linden dollars) are issued by commercial enterprises. They are not issued by or under the authority of a government body. Nor are they backed by traditional currencies, precious metals or other physical commodities.
Digital currencies potentially allow individuals and entities to conduct quick and complex international funds transfers outside the regulatory requirements of the traditional financial system. Digital currencies that are not backed, either directly or indirectly, by precious metal or bullion are not regulated by the AML/CTF Act. Some digital currencies can be purchased with traditional currencies through online digital currency exchanges (DCEs) such as Mt.Gox, VirWoX and LindeX. Bitcoins can be exchanged for stored value cards, while other digital currencies can be exchanged for gold, silver and online goods and services.
The anonymous nature of digital currencies may appeal to criminal groups and individuals who seek to use digital currencies as an instrument of crime to pay for illegal goods and services and obscure the source of illicit funds or evade tax. Criminal groups and individuals may increasingly use digital currencies, as opposed to online trading of real currency, due to the anonymity some digital currencies provide. These digital currencies present challenges for government agencies in following the money trail.
On the other hand, there are some disadvantages for criminals using digital currencies for illicit purposes. In general, digital currencies at this time are not widely accepted as payment for goods and services. This limits the avenues through which digital currency can be used to convert, move and launder illicit funds. The limited size of digital currency markets, in turn, reduces the extent to which large amounts of illicit value can be moved. In contrast, traditional financial channels (such as banks and remittance services) interact with a wide range of economic sectors through which illicit funds in large volume can be moved, co-mingled and concealed.
The overall utility of digital currencies for criminals at this point may currently be limited to niche crimes in the cyber environment and individual or smaller scale illicit activity.
Virtual worlds (also known as gaming platforms, 3D environments and massive multiplayer online games) are internet-based simulated ‘worlds’ with their own virtual ‘economy’. Examples include Second Life and World of Warcraft.
The economy of a virtual world is generally based upon a digital currency which can be purchased and/or converted into real currency. Users interact with each other in a virtual environment, purchasing virtual property, trade goods, services and currency.
By definition, virtual worlds operate in a borderless environment. They provide potential for criminals to launder money with anonymity. For example, the potential exists for virtual world users to purchase ‘virtual real estate’ using illegally obtained money in an attempt to legitimise the transfer of funds to a third party. The proceeds of these transactions can subsequently be converted into real currencies or transferred offshore or to third-party accounts.
The vulnerabilities associated with digital currencies and virtual worlds include:
- Digital currencies and virtual worlds are generally not captured by anti-money laundering and counter-terrorism financing (AML/CTF) legislation around the world. Because there is limited or no regulation of digital currency transactions, authorities have difficulty monitoring criminal activity which exploits digital currencies.
- Online DCEs provide the opportunity for criminals to exchange digital currencies for other digital currencies (for example, exchanging Bitcoins for Linden dollars), before converting them into real world currency. This provides additional ‘layering’ in the money laundering cycle.
- Criminals can use their illegally obtained physical currency to purchase the digital currency of a virtual world. Depending on the virtual world platform or online DCE, digital currency can be purchased using a debit card, credit card, internet payment service provider or, in some instances, using an online voucher payment.
- The proceeds of some transactions can be converted into traditional or real currency by linking a virtual account to a debit card or through DCEs. These channels would allow individuals to trade digital currencies and receive payment via a debit card, credit card or internet payment service provider.