Fight money laundering with hi-tech tools
Summary: special report Recent shifts in the economic climate are forcing banks to use technology against money laundering.In 1998, as it was making a few tentative steps toward a free market system, the Russian economy went into meltdown.
In 1998, as it was making a few tentative steps toward a free market system, the Russian economy went into meltdown. It is estimated between $200 billion and $500 billion was secreted out of the country over a ten-year period, forcing a liquidity crisis and total stagnation of the financial sector.
While the blame for the plunder has largely been laid at poor capital controls, exploited by the Russian Mafia, there can be no doubt that banks from around the world played a central role in quickly moving vast amounts of money out of the country.
Whether it's about hiding the proceeds from the trade in illegal drugs, or the pillaging of an economy, the motivation for money laundering is greed, and the method increasingly is the Internet. In May 2001 the ABC's Four Corners screened a documentary that traced some of the funds to banks in Australia. One analyst featured in the film described the ease by which money can be moved using Internet technology as follows.
Layering is the biggest problem, this is where money is hidden and broken up.
-- Robert Montemorra, FBI
Speaking at the 2003 Fraud Convention and Trade Show held in Sydney in late August, Robert Montemorra, chief of the asset forfeiture and money-laundering unit for the FBI, estimated anywhere between US$600 billion and US$1.8 trillion is laundered each year. And more than half of this laundering occurs in the United States.
Montemorra identifies three stages of money laundering:
-Layering is the biggest problem, this is where money is hidden and broken up," Montemorra says.
Layering is also a process conducted through the banking sector, while on the one hand it can be facilitated by technology, there are also technologies aimed at tracking and preventing ill-gotten gains from disappearing.
In 1990, the Paris-based Financial Action Task Force on Money Laundering set forth 40 guidelines aimed at clamping down on money laundering globally. Revised in 1996, these were largely ignored until the events of September 11, 2001.
This act, in turn precipitated the passing of the USA Patriot Act -- legislation which, in an attempt to strangle the sources of terrorist funding, also gave law enforcement agencies charged with chasing laundered funds real teeth for the first time.
Traditionally in Australia bank tellers have formed an unlikely front line of defence against money laundering. However, on December 8, 2003, Federal Minister for Justice and Customs Chris Ellison announced that Australia was similarly to implement new global anti-money laundering and counter-terrorist financing standards.
As the banking sector waited with baited breath the proposed legislation was repeatedly put back, but things may change with the Howard government returning to power.
Nonetheless according to Stephen Sharp, senior manager anti-money laundering for St George Bank, Australian banks have a fairly good understanding of what will be required.
-Thus far we've required staff at branches to be suspicious of certain kinds of transactions," Sharp says. -We've got some anti-money laundering systems already in place and we are looking at new systems anticipating what the new legislation will contain."
Presently all cash transactions over $10,000 need to be reported to Austrac, a government agency created through the Financial Transaction Reports Act 1988. Tellers are also required to report suspicious transactions, such as repeated transactions for amounts just below $10,000, as well as international funds transfer instructions.
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