A number of Australian banks inadvertently washed $383 million (AU$500 million) for Latin American drug cartels between 2014 and 2017, in a sophisticated transnational money-laundering scheme.
Profits from drugs sold in North America were transferred to bank accounts in south-east Asia, before being laundered through multiple Australian bank accounts via a process known as “layering”: that is, a series of transactions, transfers and purchases used to disguise the origin of illegal funds.
In this case, the funds were often used to buy high-end electronics that were then shipped overseas in containers to places like south-east Asia and the Middle East. Once those goods are sold on the legal market—a stage known of the laundering process known as “integration”—the money is legitimised.
“The predominant commodities used to transfer value were electronic devices that included smartphones, smart watches, digital cameras, laptops, gaming consoles and other personal electronic devices,” a spokesperson the Australian Border Force (ABF) told the Australian Financial Review (AFR).
“Through the course of the investigation, ABF identified nine Australian financial institutions and seven international financial institutions that were unknowingly facilitating various banking and loan accounts for the suspect entities involved in the case … [and] the trade in cocaine from South America was identified … as the source of illicit funds cleaned by the money laundering processes.”
For reasons of operational security, the ABF declined to identify the banks or drug cartels involved in the scheme—but Australia’s financial intelligence regulator, AUSTRAC, confirmed it was a highly complex operation that required collaboration between domestic and international government agencies to crack.
It was only when authorities noticed a discrepancy between the invoices used by exporters and the invoices used by importers—a technique known as “trade-based money laundering”—that the criminal network came unstuck. Products shipped overseas were deliberately undervalued on their export invoices, then sold at proper face value after arriving at their destination.
Once authorities identified these instances of “trade misinvoicing” they referred the matter to the ABF, which took down the network with the help of AUSTRAC and the related domestic and international government agencies.
“The ABF is committed to protecting the Australian community by combating and disrupting criminal behaviour that exploits Australia’s cross border trade systems and has effectively disrupted the Australian-based money laundering operations of the entities,” the ABF spokesperson declared.
Criminal organisations exploiting major banks to launder their money is nothing new. Last year, a mass leak of highly secret United States government documents revealed that some of the world’s biggest financial institutions laundered trillions of dollars of illicit cash for criminal networks and shady individuals—including drug cartels and terrorists.
Those documents, known as the FinCEN files and exposed by the International Consortium of Investigative Journalists, found that five international banks—including JPMorgan, HSBC and Deutsche Bank—moved more than $2 trillion of suspected dirty money through the global financial system between 1999 and 2017.
Some of the potentially corrupt payments listed in the FinCEN files involved the setting up of global shell companies that were linked to money laundering, arms deals, and drug cartels, and include powerful and at-times dangerous figures from more than a dozen countries.
ICIJ noted at the time that the findings represented less than 0.02 percent of the more than 12 million suspicious activity reports financial institutions filed with FinCEN between 2011 and 2017.
Those reports accused banks of moving cash through their accounts for people they could not identify, failing to report transactions with all the hallmarks of money laundering until years later, and doing business with clients who were enmeshed in financial frauds and public corruption scandals.
Follow Gavin on Twitter