Australian Transaction Reports and Analysis Centre (AUSTRAC) is Australia's anti-money laundering and counter-terrorism financing regulator and specialist financial intelligence unit. AUSTRAC works with law enforcement and other agencies to protect the integrity of the Australian financial system and fight serious crimes such as drug trafficking, tax evasion, fraud and people smuggling.
We sit down with Chief Executive Officer John Schmidt to talk about AUSTRAC's role in targeting tax crime and his vision for the years ahead.
What is your vision for AUSTRAC?
In coming years, AUSTRAC will expand its already strong contribution to Australian government efforts to combat national and transnational criminal activity.
In particular, our partner agencies will continue to call upon AUSTRAC's unique financial intelligence capabilities. There are 39 Commonwealth, state and territory agencies, including the ATO, which are authorised under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) to access AUSTRAC information.
Recent government investment in our intelligence systems will also deliver major benefits over the next couple of years, enabling us to provide more timely and targeted financial intelligence.
In a recent Chief Executive Officer forum, you spoke about increasing cooperation across Australian Government agencies to close governance gaps and better protect the system. How is AUSTRAC working with other government agencies towards this goal?
Government initiatives such as the Organised Crime Strategic Framework map out an integrated government approach to identifying and combating major crime threats. This integration ensures the specialist expertise of a range of agencies, including AUSTRAC, is focused on combating Australia's most serious crime risks.
Our intelligence is integral to the work of our partner agencies. We constantly engage with our key partners to ensure our strategic priorities are aligned with their primary investigative and enforcement activities. AUSTRAC publications, such as the recent Money laundering in Australia 2011 report and our series of typologies and case studies reports, highlight the benefits and outcomes of this cross-agency cooperation.
How is AUSTRAC creating a more hostile environment for those involved in money laundering and associated activities in Australia?
AUSTRAC administers a comprehensive international funds transfer reporting regime which gives the agency excellent visibility of the movement of funds into and out of Australia. AUSTRAC shares its financial intelligence with both domestic and international agencies.
In cases of suspected offshore tax evasion, we can identify entities that move funds to secrecy jurisdictions and detect patterns of funds flows to new and emerging secrecy jurisdictions.
Case study four from AUSTRAC's 2011 typologies and case studies report is a good example of where AUSTRAC information was used to unravel an offshore tax avoidance scheme.
What is AUSTRAC's role in the international fight against money laundering and terrorism financing?
Advances in technology and globalisation mean money laundering and other criminal activities have become increasingly complex and transnational. For AUSTRAC, our partner agencies and our overseas counterparts, this trend means international cooperation and information sharing is more important than ever.
Our work with the ATO for Project Wickenby is a prime example of how financial intelligence can be used to combat transnational crime. Recent AUSTRAC analysis has shown a 22% decrease over three years in the total value of funds flowing out of Australia to major secrecy jurisdictions (such as Switzerland, Vanuatu and Liechtenstein).
How will the enhanced regulation of the remittance sector affect your agency's outcomes?
The remittance sector has been identified both nationally and internationally as being particularly vulnerable to criminal infiltration or misuse for money laundering purposes. Recent legislative changes give us greater power to regulate this sector, including subjecting remittance businesses to greater scrutiny when applying for registration with AUSTRAC so they can legally provide remittance services. We now also have more flexibility to take enforcement action against remitters who do not comply with their obligations.
This enhanced regulatory regime is designed to reduce the risk of remitters being used to facilitate serious crimes such as money laundering, terrorism financing, people smuggling and tax evasion.
What role does the community have in helping AUSTRAC in its work to prevent money laundering?
It is estimated that serious and organised crime costs the Australian community up to $15 billion a year. All Australians benefit from efforts by government agencies to reduce this criminal activity.
AUSTRAC regulates around 13,500 businesses. These entities represent a broad cross-section of the community and range from small pubs, clubs and bookmakers in rural areas, to major banks, financial institutions and casinos. In complying with the requirements of Australia's AML/CTF regime, these businesses play a significant role in helping to fight criminal activity and maintaining the integrity of the Australian financial system.
The customer identification and other procedures put in place by reporting entities are necessary safeguards to maintain the integrity of our financial system - and in turn help to prevent crimes such as money laundering and tax evasion.
Case study: Suspects jailed after using offshore scheme to avoid $4 million tax
Authorities investigated three suspects for their involvement in the use of an offshore scheme to defraud the Commonwealth and avoid paying almost $4 million in tax.
The suspects allegedly used an offshore scheme promoted by an overseas accounting firm to avoid paying tax:
The overseas accounting firm set up a fictitious intermediary company which charged the main company, owned by the suspects, for inflated business expenses on 44 separate occasions.
By artificially inflating their business expenses, the suspects reduced their company's taxable income and therefore the amount of income tax they were required to pay.
After the main company paid the inflated invoices issued by the intermediary company, the funds used to pay the invoices were diverted into offshore trust funds held in each of the suspects' names.
These undeclared company profits were subsequently channelled through the trust funds and bank accounts, and finally withdrawn by the suspects as cash from automatic teller machines in Australia.
Ultimately, two of the suspects were found guilty of conspiring to dishonestly cause a loss to the Commonwealth and sentenced to six-and-a-half years imprisonment.
Source: AUSTRAC typologies and case studies report 2011, case study four.