Experts warn 'inconsistent' laws make luxury goods an easy target for money laundering

Experts warn 'inconsistent' laws make luxury goods an easy target for money laundering

Experts have warned laws to prevent money laundering and terrorist financing are weak and "inconsistent", with criminals adding luxury goods to their shopping list of items to purchase with the proceeds of crime.

But legal experts warn increased regulation may infringe on privacy without halting the flow of dirty money.

Liz Campbell, a professor of criminal law at Monash University, said an estimated $10-$15 billion was laundered in Australia each year despite efforts by law enforcement bodies such as AUSTRAC (the Australian Transaction Reports and Analysis Centre).

But anti-money laundering laws were "inconsistent" and did not cover some sectors at risk, she said. "If I have a bundle of cash and I go in and buy myself a Rolex or a lot of expensive clothes, that's not going to be something that the seller has to report to AUSTRAC."

Professor Campbell said global crime syndicates were channelling dirty money into luxury goods because of a lack of regulation. She said unlike property transactions and financial institutions, records are not routinely kept of purchases of luxury goods such as watches, jewellery, artworks or antiques.

From January, European Union laws will compel auctioneers and art or antique dealers to report suspicious cash transactions. But Professor Campbell said crackdowns on money laundering in one country or sector may just displace criminal activity rather than curb it.

"What that means is you're not actually preventing or changing the crime, you're just relocating it," she said.

More than $8.5 million worth of jewellery, cars and other luxury items were seized by the Australian Federal Police in November as part of an investigation into offshore funds allegedly being laundered in Australia.

Federal police also disrupted a syndicate in September that allegedly stole almost $2 million from superannuation accounts, laundering the funds overseas to buy jewellery and other "untraceable assets" before transferring the money back to Australia in crypto-currency.

Russell Wilson, a director of the Australian branch of Transparency International, said the current anti-money laundering regime "does not place obligations on dealers in luxury or high value goods to ascertain the source of the funds used to purchase the goods or to report if they suspect that the funds may have been obtained from illegal activities".

Ross Grantham, a professor of commercial law at the University of Queensland, said Australia's anti-money laundering laws did not "really deal" with buying luxury goods.

But he said "unexplained wealth laws" - which are now in place nationally and require convicted criminals to demonstrate their wealth was derived from legitimate sources - could capture luxury goods purchased with dirty money.

"My personal view is we've gone as far as we probably should," Professor Grantham said.

"We are concerned about the drug trade and preventing terrorism funding, but the price individual citizens have been asked to pay in terms of autonomy, freedom and privacy is getting pretty high."

The Financial Action Task Force, an inter-governmental body set up to combat money laundering, also criticised Australia in its latest report for gaps in its laws.

An AFP spokeswoman said criminals are "continuously looking for methods for laundering their funds and this can include the purchase of high-value goods as a way of moving or concealing criminal proceeds", but Australia had "a strong regime" to fight such activities.

An AUSTRAC spokeswoman said the financial sector was obliged to put in place systems and controls that protect from criminal abuse, while also reporting on financial transactions and suspicious activity.

“AUSTRAC works closely with Australian businesses to educate them about their money laundering and terrorism financing risks and helps them recognise and mitigate these risks,” she said.

But Ronald Pol, a senior researcher at LaTrobe University, said Westpac's alleged 23 million breaches of anti-money laundering laws highlighted failures with the system as well as the bank’s lack of compliance with reporting rules.

"The modern anti-money laundering experiment finds some criminals but is terrible at finding enough to have any real impact on crime. Banks are a much easier target for regulators," Dr Pol wrote in The Conversation.

A spokesman for the Australian Criminal Intelligence Commission said buying luxury goods with dirty money had a lower risk of detection than other methods of money laundering.

“In comparison to other forms of money laundering it is minor in terms of total value, and number of instances recorded,” he said.

Transparency International noted in its 2017 report Tainted Treasures: Money Laundering Risks in Luxury Markets that the luxury sector was an attractive method of laundering illicit funds.

"Luxury goods, super yachts and stately homes located at upmarket addresses can also bestow credibility on the corrupt, providing a sheen of legitimacy to people who benefit from stolen wealth," the report said.

By Andrew Taylor, December 29