Hitting the headlines isn’t always a good thing but countries around the world found themselves making the news as investigations by authorities and country regulators exposed criminal activity and the laundering of dirty money.
It wasn’t all bad news though as authorities sought to make improvements to regulatory frameworks and criminals were brought to justice. Here we take a look at some of the notable anti-money laundering (AML) breaches and significant updates to AML regulations.
1. Authorities shed a light on Hong Kong’s largest money laundering operation
The year kicks off with a hiss and a crackle as nine suspects, including a housewife, are arrested in Hong Kong on allegations of money laundering. The group is believed to have used dozens of bank accounts, shell companies, businesses, and mules to collect and launder dirty money, totalling $HK6 billion – around $NZ1.2 billion.
Over 7,600 transactions between January 2020 and December 2022 helped to turn ill-gotten gains into usable funds. It is also believed that the syndicate offered monetary rewards to recruit people into setting up shell companies and additional bank accounts to collect and launder the money.
Accounts controlled by the syndicate received transfers from 800 third-party individual accounts and 2,000 business accounts. Superintendent Ben Yeung Yuk-man, of the Hong Kong customs agency, said that the controlled accounts were then used to launder the funds, creating “extra layers of transactions to conceal the origins and flow of the proceeds of crime.” Money was then transferred out of the controlled accounts to another 500 individual accounts and 380 business accounts within a short period of time.
Some of the illicit funds came from a money exchange store in mainland China, but investigations into the origins of the money are ongoing, as well as the final destinations and the activity that generated the illicit money.
2. Social media helps in the fight against money laundering
It was reported back in January that children in the UK were being targeted over social media to transfer cash between bank accounts on behalf of money launderers, and receiving promises to be paid to use their personal bank accounts to transfer money.
The West Midlands Police estimated seeing around 3000 cases of fraudulent conduct. These cases indicated mule behaviour, whereby people are recruited to deposit money into accounts controlled by criminals. By using children’s bank accounts, the transfers created additional layers of transactions to hide their true source.
The case numbers rose so quickly, that awareness campaigns were launched across social media platforms such as TikTok, Instagram and YouTube.
3. Transparency International shares some bad news
The beginning of the year also saw the latest Corruption Perception Index (CPI) update from Transparency International, showing some big changes in the perception of countries corruption.
The CPI ranks 180 countries and territories by perceived levels of public sector corruption, ranking from 0 – 100 – with 100 being the cleanest score. Key concerns from Transparency International include the unchanged global average of 43, and two-thirds of countries scoring below 50. They also note that 26 countries scored their lowest scores ever, including the United Kingdom, who dropped five points since 2021, and Switzerland, who dropped two points.
While New Zealand is sitting at 2nd equal with Finland, there has still been a decrease in the overall score, dropping one point since 2021.
While reading a report isn’t everybody’s idea of fun, this is an invaluable tool for AML risk assessments at both the business and customer level, enabling reporting entities to understand the potential risk of ML/TF occurring in their business through dealings internationally or with clients who are based overseas. It can also be used in carrying out reviews of business risk assessments as well as ongoing due diligence and monitoring of customers.
4. Operation Avarus-Midas strikes a blow to money laundering syndicate
February saw the Australian Federal Police (AFP) arrest nine people with allegations of money laundering, and seize property including one in Sydney’s Pitt Street Mall, worth over $21million in Operation Avarus-Midas.
The police were monitoring numerous suspects when they noticed a global company, Tara Global Pty, purchasing the Sydney CBD property. The company funded the purchase initially with $7million from Hong Kong shelf companies, with the money going to an NAB account set up by a woman claiming to be a wealthy investor from China.
Tara Global sought additional funding from other Australian banks to complete the purchase. They applied to the Commonwealth Bank for a loan of $11million, which was declined by the bank due to suspicions held by them. Tara Global then contacted a trusted insider at NAB, who directed them to another financier, Latrobe Finance, to make a fresh application. There is suspicion that the application was fraudulent.
The insider at NAB also gave advice to Tara Global about getting more funding from the bank but their accounts were frozen in September 2022. This did not seem to faze the syndicate, who are alleged to routinely wind up and phoenix old companies into new corporate structures and get new bank accounts to continue their laundering.
AFP’s Assistant Commissioner Eastern Command, Kirsty Schofield, describes the alleged syndicate and similar ones as being “the lifeblood of organised crime” both in Australia and also globally.
The ease of the purchase of this particular property is escalating the calls in Australia for Tranche 2 entities to be captured by the AML/CTF Act, enabling better oversight of the purchase of property from multiple industries.
5. Will Australia embrace tranche two entities?
In April the Attorney General Department (AGD) in Australia invited public consultation on proposed reforms of Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regime.
The proposed reform is to extend AML obligations to so called ‘tranche two’ professions including, lawyers, accountants, trust and company service providers, real estate agents and dealers in precious metals and stones.
An unpopular idea for many with the Law Commission and Real Estate representatives having lobbied parliament against such changes. But Australia is now one of only five jurisdictions in the Financial Action Task Force (FATF) Global Network, alongside China, Haiti, Madagascar, and the United States, that do not regulate tranche two entities.As pressure increases it may only be a matter of time before changes take place. Read more in ‘Will Australia plug the AML gap?’
6. Cocaine lost at sea
Earlier in the year over three tonnes of cocaine in 81 bales worth around $500million was seized in the Pacific Ocean, in a joint operation called Operation Hydros between NZ Police, Customs and the NZDF. The agencies had been detecting and monitoring the suspicious movement of vessels since December 2022, and international organisations assisted in the operation.
Police Commissioner Andrew Coster said the seizure was one of the largest in New Zealand history, and could supply New Zealand for around 30 years. It is believed that the floating haul was destined for Australia.
While destined for Australia, this seizure has helped to reduce community harm, as well as the potential for dirty money to be used in the purchase or sale of these drugs. Organised crime groups have lost a considerable amount of product that would enable the cycle of money laundering to continue. Cash is still king for illicit substances, which is difficult to track in the traditional financial sector.
7. Beneficial ownership comes under scrutiny in Recommendation 24
FATF have released their updated guidance to accompany Recommendation 24, which addresses beneficial ownership of legal persons.
These updates started in March 2022, with agreements reached to strengthen beneficial ownership standards. The new guidance discusses a multi-prong approach to beneficial ownership identification and verification, including the use of companies registers, the information provided by the companies themselves, and potential for countries to introduce alternative mechanisms at their own discretion.
These updates were reflective of the mutual evaluations carried out by FATF, and their findings that the multi-pronged approaches were more effective to prevent the misuse of legal persons and increase transparency of beneficial ownership.
The updates come after consultation with the private sector and external stakeholders. Tic company contributed to the consultation in December 2022, focusing on how updates to guidance would be beneficial to New Zealand reporting entities and the AML industry overall.
8. Crown Resorts receives record breaking penalties
One of the biggest AML fines in 2023 saw Crown Casino agree to pay a massive A$450 million penalty after failing to comply with anti money laundering regulations.
The fine, is the third-largest for an Australian company and one of the largest in the gambling industry. AUSTRAC’s CEO Nicole Rose said “Crown’s contraventions… meant that a range of obviously high-risk practices, behaviours and customer relationships were allowed to continue unchecked for many years.”
Crown failed to establish AML/CTF programmes based on appropriate risk assessments, did not have appropriate systems and controls to manage their risks, and did not have appropriate oversight by their Boards and senior management.
A lesson for all of us to ensure we properly monitor transactions, and take suitable action if a client displays suspicious activity, is connected to criminal groups or subject to sanctions.
9. Bank of Queensland caught out over money laundering non-compliance
Banks by the very nature of their business can be seen as a target for potential money laundering. All around the world banks have been subject to AML warnings and fines, and one of the latest is not so far away from home – The Bank of Queensland (BoQ). On failure to meet AUSTRAC’s AML compliance standards BoQ agreed to enter an enforceable undertaking, and were forced by Australian Prudential Regulation Authority (APRA) to hold an extra $50 million in capital.
This committed BoQ to an ongoing remedial action plan to improve its AML/CTF programme, and to securing an external auditor.
AUSTRAC findings showed potential areas of non-compliance included:
- Draft and/or incomplete policies and procedures which related to, or formed part of, the Joint AML/CTF Programme.
- Lack of risk-based systems and controls in their Joint AML/CTF Programme to respond to discrepancies and to determine when any other additional KYC information needed to be collected.
- Failure to consider the ML/TF risk posed by customers and failure to include appropriate risk-management systems in its Joint AML/CTF Programme to identify politically exposed persons (PEPs).
- Multiple members of the Bank of Queensland DBG failed to carry out applicable customer identification procedures (ACIP), and failed to monitor their customers with a view to identifying, mitigating, and managing the ML/TF risk it reasonably faced.
10. Singapore breaks a record
Singapore’s biggest money laundering case made a splash in the news in August with authorities seizing more than S$2.8 billion worth of assets.
Ten suspects faced money laundering charges linked to illegal online gambling and scams.
This shook up the financial industry as the suspects had banking relationships with more than ten financial institutions in Singapore. Since the case came to light Singaporean banks have applied stricter client scrutiny procedures to help fight against illicit financial activities.
The Ministry of Home Affairs has also looked at Singapore’s anti-money laundering regime to ensure it is robust and effective. Josephine Teo, Minister for Communications and Information & Second Minister for Home Affairs stated:
“ ….we have been undertaking ongoing reviews in the various sectors, to tighten our anti-money laundering regime. Learning from this case, we will consider further measures to strengthen our regime.”
As criminals look to circumvent systems and procedures, the onus is on us, regulators, and authorities around the world to become gatekeepers to protect against money laundering and criminal activity.
11. Amendments to the AML/CFT Act
In a bid to ensure New Zealand’s AML/CFT Act fully complied with Financial Action Task Force (FATF) recommendations, a number of changes to the Act were agreed this year and passed by Cabinet.
2023 changes included:
- Alternative timelines for when customer due diligence (CDD) is conducted by real estate agents/agencies.
- Removal of the requirement to conduct new CDD when undertaking new engagements with existing ‘customers’ for designated non-financial businesses or professions (DNFBP).
- Clarified definition of a “Nominee Director”.
- Exemption to carry out due diligence in certain circumstances for corporate trustees and nominee companies that are subsidiaries of reporting entities.
- Definition of countries with insufficient anti-money laundering and countering financing of terrorism systems or measures.
- Designated business group may share compliance officer.
- Definition of ‘Virtual asset” introduced and Act to apply to those captured under this definition.
- Extending a range of exemptions.
Look out for further changes coming into effect in June 2024 and June 2025. For a rundown on all the key changes and what it means for you, read more in ‘AML/CFT Act amendments: what you need to know’.
12. Binance: largest cryptocurrency, largest fine
To round off our year in AML we go to America for one of the largest fines of the year. The U.S. Department of Justice (DoJ) found crypto giant Binance guilty of choosing not to comply with U.S. law and failing to implement controls and procedures to prevent money laundering.
This failure to comply with money laundering laws and engaging in unlicensed money transmitting, and sanctions violations resulted in Binance agreeing to pay fines of over US$4billion. This seems like an eye watering amount but the breaches were severe. As the attorney general Merrick Garland said:
“Binance wilfully enabled hundreds of millions of dollars in transactions between American users and users subject to US sanctions. Its platform accommodated criminals across the world who used Binance to move stolen funds and other criminal proceeds.”
Summary
Well, that’s a wrap for now! These incidents are just the tip of the iceberg and there are many more cases of AML breaches which occurred during the year and unfortunately, we’re likely to continue to see more as we move into 2024.
To help avoid coming under the increased scrutiny of regulators, ensure you have a robust, risk-based compliance programme in place, staff dealing with AML are appropriately trained, have a thorough customer due diligence framework, keep detailed records, report suspicious activity, conduct regular reviews, and commit to carrying out your programme really, really well.
If you’d like some help ensuring your compliance programme is up to regulator standard and you’re implementing your AML obligations correctly, get in touch with us on 09 369 6867 or email info@ticcompany.com.
tic company 
Rajeev Nedumaran 
Tadius Munapeyi 
