From ‘money muling’ to ‘micro-laundering’, new scams grab watchdog’s attention

As far as money-laundering scams go, it was a pretty good one. The crime syndicate had one of its people depositing hundreds of thousands of dollars in cash across different ATMs in east Melbourne – all below the $10,000 threshold that would trigger a report from each bank to financial crime regulator AUSTRAC.

Five people were subsequently arrested by police who also seized illegal firearms, luxury cars, cash and drugs. It was all thanks to a successful program of co-operation between AUSTRAC and the companies it oversees, including Australia’s largest banks, which has helped expose a layer of criminal activity that was previously beyond the watchdog’s reach.

Intelligence from AUSTRAC’s Fintel Alliance helped crack the Operation Avarus-Midas money-laundering ring in 2023.Credit: AFP

AUSTRAC says it will now expand this alliance, where it pools data with financial providers like the big four banks, and processes the information to obtain insights and leads that were not possible previously through its mandatory reporting thresholds and suspicious matter reports provided by its members.

“This Fintel Alliance, bringing the private sector and AUSTRAC together in this way, is just a complete game changer for us,” says AUSTRAC chief executive Brendan Thomas.

In the case of the ATM scam, AUSTRAC collaborated with the big four banks late last year to sift through cash deposit information for transactions above $1000 and below $10,000 which yielded 50 million unique data points.

Over the course of a week, analysts from AUSTRAC, the banks, and the Australian Federal Police crunched the huge block of data. In a few days, it revealed major criminal networks of which they had not been aware.

AUSTRAC chief executive Brendan Thomas is making the Fintel Alliance a core part of the regulator’s operations. Credit: Dominic Lorrimer

The operation gathered footage from different bank ATMs showing the same person making multiple deposits within a small area. Four of the five people arrested were not known to the police and had no criminal record.

The Fintel Alliance started in 2017, however, Thomas says they are supercharging it now by making the intelligence partnership a central component of AUSTRAC’s operations going forward.

“It’s allowing us to get access to bigger amounts of data and information in a much faster way, and it then allows us to bring a bunch of different perspectives to analysing that data and information to give us a better understanding of the criminal threats, risks to the financial system and, importantly, big criminal networks,” he says.

The alliance is being used to detect other scams like micro-laundering where illicit funds are mingled with money from legitimate sources and moved at volume through low-value digital transactions.

Money muling is another issue the alliance has uncovered. It involves students from overseas receiving ads to sell their bank accounts after they leave Australia. It gives criminals control of bank accounts that have already been vetted by the banks and are not considered a threat.

Scambling is another threat not captured by traditional AUSTRAC reporting thresholds. It involves unlicensed gambling operators tricking people onto scam websites and then to participate in gambling. A campaign by the watchdog found scambling to be a particular problem in regional and remote Aboriginal communities.

Co-operation through the Fintel Alliance represents a remarkable turnaround in the relationship between the regulator and the companies it regulates.

A data haul from Australia’s largest banks helped uncover a money-laundering scam operating across bank ATMs in Melbourne late last year. Credit: Kate Geraghty

In 2020, Westpac was ordered by the courts to pay a $1.3 billion fine for money-laundering breaches after AUSTRAC brought action against the bank.

The Commonwealth Bank paid a $700 million fine in 2018, Crown was hit with a $350 million penalty in 2023, and Star Entertainment is due to appear in court next month and may face a $300 million fine for alleged money-laundering breaches.

The banks and casinos have beefed up their anti-money laundering units in response to these cases which has helped boost the effectiveness of the alliance. In turn, it allows these companies to check whether their controls are working effectively, spot any weaknesses in their systems and reduce the risk of money-laundering breaches.

“Criminals are adept at finding the weak points. By working together to develop and use new tools, technologies and fresh approaches to combat crime, we can strengthen the ecosystem we all operate in,” says ANZ Group’s financial crime risk boss, Cassandra Hewett.

To give an idea of how much things have changed, NAB’s financial crime risk boss Paul Jevtovic was AUSTRAC’s chief executive when the Fintel Alliance was first introduced.

For AUSTRAC, the next step is to take the program global. After all, that is where most of the money being laundered in Australia is coming from.

“Organised crime is a global business,” Thomas says.

“We’ve got billions of dollars moving between jurisdictions around the world, and we can all take action in our own jurisdictions to combat that much (more strongly) if we’ve got international governments, global banks and others working together across multiple jurisdictions to try and combat crime.

“I hope that’s the next evolution of this.”

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