The consequences of a poor anti-money laundering program: the HSBC case study

Image source: Flickr user photobunny

On 17 July 2012, the United States Senate Permanent Subcommittee on Investigations (the Committee) released a lengthy report detailing significant deficiencies in the anti-money laundering (AML) and counter-terrorism financing systems of one of the largest banks in the world.  The report is the result of a year-long inquiry by the Committee involving over 75 interviews and the examination of more than 1.4 million documents.  It reveals a long history of weak anti-money laundering controls resulting in the misuse of HSBC’s key US affiliate to launder the proceeds of drug trafficking, circumvent the prohibitions designed to prevent funds from being directed to rogue jurisdictions and to provide US dollars to banks linked to terrorist financing.

New international standards on countering money laundering and terrorist financing released

Image source: Flickr user Images_of_Money

On 16 February, the Financial Action Taskforce released its revised Recommendations for combating money laundering and terrorist financing, which now also cover financing of the proliferation of weapons of mass destruction. The FATF is an intergovernmental body established to develop and promote national and international policies to combat money laundering and terrorist financing. It was established in 1989 by the G7 and Australia is a founding member. With the cost of money laundering and underlying serious crime estimated to be between two and five percent of global GDP, it is important that the standards used by over 180 countries as the basis of their responses remain up to date and reflect emerging threats.

Money Laundering in Australia

Source: United Nations Office on Drugs and Crime

The Australian Transaction Reports and Analysis Centre (AUSTRAC) recently published Money Laundering in Australia 2011, a consolidated picture of money laundering activity in Australia, key vulnerabilities and emerging threats. The report is drawn from Australia's first (classified) National Threat Assessment on money laundering, produced as part of the Commonwealth Government's Organised Crime Response Plan. 

Every year, crimes such as drug importation, fraud, people trafficking, migrant smuggling, corruption and theft generate large amounts of money, usually in cash. Money laundering is the processing of these proceeds of crime to conceal their illegal origin  -- turning "dirty" cash into "clean" money.