The Australian leading financial service providers (buy now pay later) such as Afterpay and Zip have been in the limelight recently for using electoral data, which they have defended on the grounds of using the information for devising credit checks against terrorist financing, money laundering, and criminal fraud.
Market analysts often criticize the lack of political will of all the Australian governments in power so far, in managing nation’s money laundering activities. It is often cited that Australia's bubbling property market (although now in softening phase) is an attractive haven for offenders, laundering billions of dollars through residential property.
Considering this, it becomes imperative to understand what money laundering means.
Money laundering is the mechanism of transferring criminal proceeds such as terrorist operations, smuggling, cybercrime or drug trafficking into a legitimate source. The money launderers and unscrupulous elements convert the dirty money from illicit sources into clean activities. By pushing the funds into the financial sector, the funds look like appearing from authentic and legitimate sources, thereby hiding the original source and further financial destination of the funds raised from criminal conduct.
Money Launders are often involved in real estate laundering, casino laundering, shell company investment and trade-based laundering. We, therefore, have Anti- Money Laundering laws in place to prevent the practice of generating income through illegal actions, directing the financial institutions and banks particularly to undertake efficient due-diligence before offering financial services to its clients. The Financial Task Force is the global body targeting international cooperation for combating money laundering. The Bank Secrecy Act was formulated by Congress in 1970, as an effort to combat the use of financial institutions in illegal funds movement.
There are three stages adopted by money launderers for transferring illegal funds into legit sources: Placement, Layering (Structuring) and Integration. Placement stage involves bundling up of illegal funds and ingesting them in activities such as gambling, loan repayment, currency smuggling, and currency exchanges. Layering stage involves international movements of the illegal funds to separate the illicit funds from its crime source. Criminals undertake sophisticated layering of international financial transactions, electronic funds transfer and investment in overseas advanced financial options, evading regulatory detection. Lastly, at the Integration stage, the money proceeds back to the launders from legit and authentic financial sources.
The black-market gambling and money laundering market is projected to peak A$ 2 billion in Australia in 2020, as suggested by a recent report by the Hong Kong-based Asian Racing Federation. Black Economy Taskforce (BET) has highlighted that both illegal gambling and money laundering activities are helping to fuel a black-market economy. BET has recommended that internet service providers (ISP) could be forced to block all illegal offshore gambling websites and banks should step in to prevent transactions that are destined for illegal foreign sites. Australia’s anti-money laundering regulator, AUSTRAC and international watchdog Financial Action Task Force (FATF) has a significant role to play in bringing illegal financial activities in check domestically as well as globally.
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