Austrac warns banks over dirty money from illicit tobacco sales
The nation’s financial watchdog has ordered major banks to tighten EFTPOS controls after The Australian uncovered how profits from illicit tobacco sales are fast laundered.
Australia’s financial crime watchdog has called on the major banks to take “immediate action” to oversee EFTPOS sales used to launder dirty money from illicit tobacco stores across the country.
The call for action comes two months after an investigation by The Australian revealed how profits from illegal cigarette sales in a suburban strip mall can be in the hands of an offshore crime boss within 24 hours.
In a joint statement, Austrac chief executive Brendan Thomas and the Albanese government’s handpicked Illicit Tobacco and E-cigarette Commissioner Amber Shuhyta warned banks could be dealing with proceeds of crime.
The Australian revealed in September how organised criminal organisations were exploiting the banking system, payment terminals and international wire transfers to move illicit cash offshore under the guise of ordinary business activity.
The process typically starts in a small tobacconist, convenience store or corner shop that sells illicit cigarettes where payments – whether made in cash or by card – are put through point-of-sale systems connected to major banks.
On the surface, the income appears to be legitimate retail revenue. In truth, however, it often includes profits from untaxed cigarettes smuggled into Australia or produced in secret factories.
“I’m confident no Australian bank wants this dirty money in their business and will work with us to help shut it out,” Mr Thomas said.
He added that any bank receiving funds through these channels “is at risk of dealing with illicit proceeds”.
“We are asking banks to assess, mitigate and, where possible, eliminate these risks.
“Where banks continue to provide services to tobacconists and convenience stores, they must closely monitor for and report suspicious matters.
“This is a crime type that is generating billions of dollars in criminal proceeds, and the scale of the activity is undermining Australia’s economic integrity and community safety.”
Austrac has also warned banks to watch for customers who may shift their activity elsewhere as tighter scrutiny comes into force.
Mr Thomas urged major banks to strengthen their controls, but cautioned they must strike a careful balance to prevent unintended harm to legitimate businesses.
“There are legitimate needs for access to cash services, particularly in rural and remote communities,” he said.
“Our shared goal is to target criminal enterprises, not legitimate economic activity.”
Austrac’s administration of the Anti-Money Laundering and Counter-Terrorism Financing Act laws is one feature of a broader, multipronged strategy co-ordinated by the ITEC that aims to shrink the illicit market.
Next week, bank chiefs are expected to front the parliamentary economics committee in Canberra where they will be grilled on illicit tobacco sales.
The House of Representatives standing committee on economics, chaired by former Labor minister Ed Husic, will examine how the major banks respond to current and emerging risks, including the sale and facilitation of illicit tobacco profits.
Liberal member for Casey in Victoria, Aaron Violi, who is also a committee member, confirmed bank chiefs would be asked about the “crippling trade”.
“The Albanese Labor government needs to outline a real plan to address the cause of the illegal tobacco trade, not just the symptoms,” Mr Violi said.
“The illegal tobacco trade is disproportionately impacting small and family businesses in close proximity to these stores, through the impacts of firebombing, increases to insurance costs, and fear for safety, just to name a few.
“Banks should be doing everything in their power to meet Austrac’s requirements and ensure they are not complicit in this community crippling trade.”
Australian Banking Association chief executive Simon Birmingham, who was also briefed by the financial watchdog, said banks shared the concerns raised by Austrac and already had capabilities to detect suspicious transactions related to the sale of illicit tobacco.
“Community angst about the growth in illegal sales is entirely understandable and banks are doing what they legally can to help law enforcement authorities overcome these criminal acts,” he said.
“Where suspicious transactions are detected, they are reported to Austrac, and this will continue. We welcome Austrac’s acknowledgment of the particular risks emanating from non-bank ATMs and technologies.”
Banks are legally required to know their customers, understand the nature of their business, and monitor transactions for suspicious activity.
There is no prohibition on banks providing payment services to high-risk merchants, meaning it remains a commercial decision whether to open or close accounts for businesses suspected of selling illicit tobacco.
That discretion is what allows the laundering process to persist.
If a bank determines it can manage the risk of servicing a suspicious retailer, the business keeps its access to the financial system and the money keeps moving.
Once the proceeds are deposited, they can be pooled and shifted between accounts.
A common next step is converting the funds into outgoing transfers, often sent within moments to accounts controlled by syndicate members overseas.
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