How criminals launder money through today’s networks

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Milind Tiwari:
The way how generative AI technologies are advancing, I think it's only very soon in probably next five years that we might see emergence of a metaverse platform whereby transactions might be taking place through the use of cryptocurrencies. And that might present an avenue for money laundering and terrorism financing.

Jackie Blondell:
Welcome to Crime by Numbers: The money launderers. I’m Jacqueline Blondell and this is episode two where we delve into just what criminals load into washing machine. This is a mixed wash. It can range from food, sporting clubs to precious gems and metals. And we discover how cash ‘travels’ without leaving the country at all via Hawala dealers. We uncover what a money mule is and how they are recruited.

Also, why crypto is making detection more difficult. And finally, we explore why the money launders are heading into the metaverse. Firstly, let’s look at what does end up in the wash. As we mentioned last episode, there’s multifarious ways-and-means of cleaning cash including masquerading as a legitimate operation. These companies can operate fake services and issue questionable invoices. Here’s Brendan Thomas, CEO of Australia’s anti-money laundering watch dog AUSTRAC.

Brendan Thomas:
A big part of money laundering is trying to take cash and get that cash legitimately into the financial system. So sometimes it's moving cash into the financial system and then digitally moving that value through a whole range of transactions that obscure the origin of where that money's come from. Money laundering organisations do this in really creative ways. They do it through creating fake companies and layers of fake companies. They do it through inventing fake services and invoicing for jobs and work that actually don't exist. They do it through paying workers off the books to avoid taxation obligations, and they're constantly looking for new and creative ways to launder money. We see it all the time coming up in new industries.

Jackie Blondell:
Accountants, lawyers and real estate agents are three of the new gatekeeper professions coming into Anti-Money Laundering and Counter Terrorism regime. Dealers in precious metals and gems are also in the mix. The reason? These goods are incredibly portable and reliable. Brendan Thomas again:

Brendan Thomas:
People launder money in all sorts of creative ways. The criminal networks that we fight against are some of the more innovative and creative people you'll ever come across. One of the ways people try and launder money is to try and store it in something that will maintain its wealth. So people launder money, for example, through purchasing gold and gold bullion dealers already come under our regulation, and we have seen money laundering through that industry.

But people also launder money by buying jewellery and precious metal and precious stones. It's much easier to smuggle a diamond watch and a diamond bracelet out of the country than it is to smuggle a bag full of cash. So internationally, people do launder money through buying precious metal and stones because those purchases, those items hold their value, they're really easily transportable and they're very easily tradeable. So you can buy them in one country and sell them in another and be pretty confident you're going to keep something close to the original value.

Jackie Blondell:
Sometimes cash or inventory doesn’t even have to move jurisdictions. It might just be a matter of debits and credits. This is where Hawala dealers come in. Fraud investigator and former police officer Geoff Peck explains:

Geoff Peck:
A Hawala dealer is essentially an unregistered money exchange. So they provide services where, similar to a bank who will assist you to send money overseas. For example, a Hawala dealer in Melbourne will have an associate in a foreign jurisdiction. Let's just say China, for example. And if I have an associate in China who wants to get money into Australia, there are restrictions on how much money a Chinese national can expatriate out of mainland China without telling the government. 

So if they want to send say $100,000 to Australia, but they don't want the government to know about it, they'll go to a Hawala dealer in China who'll have an associate here in Melbourne. I'll hand that person the equivalent of a $100,000 Australian in China. He will ring his associate in Melbourne and say, I've got the money, you can release $100,000 in Melbourne. So there's no physical movement of money between the jurisdictions. 

It's really just debit and credit entries. And because these Hawala dealers have lots of clients, there's money flowing both ways, ultimately, periodically they will settle amongst themselves. Okay, who's up? Who's down? What do I need to pay you? And that's how Hawalas work, high risk. For example, using the Chinese case, I want the money in Australia, but because there's no money moving from China to Australia, the money in Australia's got to come from somewhere and it will often come from proceeds of crime. So this is a way of being able to disperse to an innocent person $100,000 of my ill-gotten gains, and I know that I've got that money sitting in China.

Jackie Blondell:
Another less known avenue for money laundering is soccer. The international nature of the sport  - with its cross-border money flows and sheer number of participants - makes it an attractive area for criminals seeking to launder money. A 2009 report - compiled with the active cooperation of major soccer nations - found more than 20 money laundering cases, ranging from simple cash smuggling to cases involving complex legal transactions. Incidents involved both amateur and professional clubs.  

Food is another often overlooked avenue for laundering money. Global revenue in the food industry is worth 9.67 trillion US Dollars and is expected to grow six and a quarter per cent annually until 2031. This is fertile ground for money launderers says Dr Milind Tiwari. Milind is a senior lecturer at the Australian Graduate School of Policing and Security at Charles Sturt University.

Milind Tiwari:
I think one of the very interesting domains is the food sector. There has been a focus on trade-based money laundering, but not per se on the food sector, especially because there is a complex supply chain. The sector is cash intensive in nature whereby a lot of cash is involved. The complex supply chain allows for illicit actors to infiltrate that supply chain.

Jackie Blondell:
2018 – 2020 figures conservatively estimate the cost of food fraud to be in the region of 40 – 49 billion US Dollars. Illicit interventions can include using the supply chain for transporting illegal goods or mixing in additives to adulterate food. This has involved horsemeat masquerading as beef, parmesan cheese contaminated with cellulose, and olive oil diluted with cheaper oils.

 These interventions into the food supply chain can be very dangerous. In 2008 nearly 300,000 children were affected and six died when melamine – normally used in non-chip crockery and laminate flooring – was added to baby formula, so the milk appeared to have a higher protein content. In 2025 the Global Food Fraud Index reported a sharp increase in fraud, in nuts, cereal and dairy products. And - for the first time - non-alcoholic beverages and garlic. Food fraud is as profitable as trafficking cocaine but is much less risky. This is both a predicate crime, and an ideal avenue for money launderers. Milind Tiwari notes that criminals can enter the food supply chain at its beginning and its end stages.

Milind Tiwari:
Organised crime groups have either provided money as a form of loans to manufacturers or farmers, which again, the loan is from the illicit funds that have been generated. So that's just one way of funnelling funds into the food sector. Similarly, like fronts, because restaurants, cafes, pubs, and not saying that all restaurants, cafes, pubs are money laundering businesses, but they do present an opportunity because of their cash intensive nature. Definitely we see a move towards digital payments, but nonetheless, there is also acceptance of cash, which just provides an opportunity for them to be used as a conduit for money laundering.

Jackie Blondell:
According to AUSTRAC, the top three crimes that predicate money laundering in Australia are illicit drugs, tax and revenue fraud and Government program fraud. Number four is scams. Here’s Kris Wilson of the Australian Federal Police.

Kris Wilson:
We've obviously got romance scams which have plagued Australia for years, but then also we've got a lot of the investment type of opportunities that Australians look to, I guess, invest money in due to rising cost of living. That has seen a real upturn and spike in frequency and amounts. Online scams are costing Australia 1-2 billion a year alone. We are considered to be a very green country when it comes to online scams.

When I say green country, we are a very rich target. We have a high standard of living. We have a generally high average disposable income amongst our population. And Australians in general seen to be, as a nation, we are very trusting. We like to look for the best in everyone. And that probably makes us more susceptible to falling victim to scams.

Jackie Blondell:
According to AUSTRAC these scams are largely orchestrated by offshore criminals, including organised crime groups. These criminals aren’t looking for gold, diamonds and artworks to launder their money with. Their gains are already in the financial system. The trick is how to move these funds out of the country. This where domestic bank accounts and money mules come into the picture. Here’s Kris Wilson.

Kris Wilson:
Money mules have been recruited for some decades now, really. And money muling is extensively widely used across multiple crime types as a means of deflecting attention from the more serious criminals that are seeking to launder money from whatever the crime type may be, whether it be from illicit drug sales or looking at conducting SIM swapping off the back of social engineering, victim's personal identity information and draining their bank accounts.

Jackie Blondell:
These criminals have specific types of people in mind.

Kris Wilson:
What we see with the online scams is that the real criminals behind it will have a demographic. They'll have a particular profile of a money mule already mapped out of people that they intend to target. And that could be everything from, say, university students or particularly foreign students that are studying in Australia and money for them when you're going through university can be typically quite tight.

So, people will look for easy opportunities to make a few extra dollars, or it might be sort of more middle-aged Australians or people around that sort of retirement age that might be looking for a means or opportunity to earn a little bit of extra money because their superannuation balance might not be so great. And earning, say, $5,000, for example, to create a registered Australian business, which can be done online, and then walking into a bank branch and opening up a business bank account and linking it to said business, that's pretty easy money for what is probably maybe one to two hours of work, or depending how proficient they are, maybe even less. 

Technology in general makes things quite easy now to do. As I said earlier, you can register a business online. You don't need to walk into a bricks and mortar building to do it. And even opening up bank accounts to a degree, provided you've got the right identity documents available for you, you can open up a bank account online as well and not actually physically speak to a person. In many cases, they still do, but you don't have to.

But again, this is where I guess the real criminals in this space are clever. By recruiting a money mule, they're effectively placing the majority of the risk on the money mule because it's the money mule that is compromising their own identity in the perpetration of the crime itself. So, usually what they will do once they've actually got to the point of opening the bank account, whatever bank that may be with and whatever means that bank uses to control access to the account, the money mule will provide that access back to the person who has recruited them, and that person may in turn hand it to somebody else that controls the online access to the account, and that's where they've then got the opportunity to hide behind in encryption techniques over the internet. 

And again, we do become aware of the accounts that are opened by mules, but the challenge we have is that by the time the financial industry are aware that the account is effectively compromised, the money has gone in and it's been moved. Although having said that, the detection systems that the financial industry have are continually improving and we have had quite a few success stories, where we've been able to block money before it's actually been moved out of the mule account.

Jackie Blondell:
Crypto currency ATMs are yet another avenue for money launderers. And they are the bane of investigators and watchdogs says  Kris Wilson.

Kris Wilson:
Australia has had one of the highest uptakes in rolling out cryptocurrency ATMs of anywhere in the world, and that's proven to be a challenge for us at the moment. But one thing we have been doing in that space, again, is promoting the pitfalls of cryptocurrency, particularly scams. And we've had some good response from industry where crypto machines are being identified as being used to launder cryptocurrency. Those machines are being shut down and removed from use. So, that's one example of how we're working towards making a difference in that space.

Jackie Blondell:
AUSTRAC’s  Brendan Thomas  agrees.

Brendan Thomas:
About five years ago we had almost none. Now we've got more than 2,000 of them. And they've grown quite significantly and are a significant money laundering risk in Australia. A lot of countries don't allow crypto ATMs to operate or have significantly limited the availability of those ATMs. But where we see them in Australia, they are still a money laundering risk.

Jackie Blondell:
Crypto is very opaque, so it’s an attractive currency for criminals, notes Geoff Peck.

Geoff Peck:
It's a little bit different in the crypto world because in some ways crypto alleviates the need for that first placement because crypto is created outside the financial system and can remain outside the financial system. So for example, if criminals are interacting with each other, they're just exchanging cryptocurrencies, crypto assets, which don't even get to see a bank.

The difficulty that criminals face with crypto is that ultimately they need to get it out into what's called fiat currency, so normal currency, which is where they need to involve a bank in some way. But that really risky first step, crypto can alleviate that for them.

Jackie Blondell:
Crypto currency is hardly the final technological frontier for money launderers, warns Milind Tiwari.

Milind Tiwari:
Apart from the use of cryptocurrencies, now you can see a metaverse which might raise a potential opportunity to launder money. I think metaverse at present, it's in a very infant stage, but the way how generative AI technologies are advancing, I think it's only very soon in probably next five years that we might see emergence of a metaverse platform whereby transactions might be taking place through the use of cryptocurrencies. And that might present an avenue for money laundering and terrorism financing.

Jackie Blondell:
You may have heard of Mark Zuckerberg’s efforts to build a Metaverse. This is a massive immersive hyper-real 3D world, where people using headsets can enter the space as avatars. According to Interpol, several police forces have received reports of so-called ‘metacrimes’, including fraud, hacking and impersonation. As the metaverse expands, Interpol believes this is a fertile future avenue for money launderers. So does Milind Tiwari.

Milind Tiwari:
Within these metaverse platforms, the transactions will be taking place through cryptocurrencies because the underlying architecture does involve the use of blockchain. So, yeah. And when these transactions are not monitored, when they're not regulated, there's a possibility of not only laundering money, but yeah, expanding upon certain ideologies.

Jackie Blondell:
Coming up in our final episode of this series, we look the new gatekeepers being recruited to join the fight against money laundering. That’s next on Crime by Numbers.