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Brendan Thomas:
There’s a lot of dirty money floating through the Australian economy. We know the illicit drug market is worth more than $12 billion. The illicit tobacco market is worth more than $7 billion. So just those two crime types alone is close to $20 billion worth of illegal money in the Australian economy.
Jackie Blondell:
Converting dirty money into so-called ‘clean’ cash is the fundamental aim of all money laundering operations. Just how the cleaning process works can happen in a manner of nefarious ways, including using the financial system or moving cash via couriers.
I’m Jacqueline Blondell and in this, our second series of Crime by Numbers we delve into the murky depths of the world’s laundromat and unpack why money laundering is so harmful and what we can all do to clean it up.
This is episode one: Inside the laundry.
In episode one we are going to look at the origins of money laundering, how the process works and the sheer cost to the global and local economies.
Even though intelligence and technology have improved detection rates, money laundering is widespread and particularly difficult to track and control. But the crime is as old as time.
As far back as the Tuang Dynasty Chinese merchants used the flying money system to move assets outside of local jurisdictions to avoid confiscation by bureaucrats.
This system allowed traders to remain anonymous when moving money about. But why do we use the cleaning analogy for moving money about in nefarious ways?
Here’s Geoff Peck, a former fraud squad detective with the Victoria Police’s major Fraud Group. He is now managing director of Forensic Integrity Solutions.
Geoff Peck:
This sort of activity's been going on for millennia, but it's probably in the 1920s in the modern era where money laundering came to the fore. And it's when criminals were able to then generate vast amounts of profit. Because of course, if you're a petty criminal and you can generate even $10,000 profit, you don't necessarily need to launder that. You can spend that and it won't raise any suspicions.
But when you're generating vast quantities of profits and money, you need to then distance that so you can use it.
And of course, this came to the fore in the 1920s during Prohibition in the US. Think of Al Capone and the vast sums of money that he and his gang was starting to generate. And then have a think about what brought him unstuck. It was tax evasion. And criminals don't like paying tax.
They want to spend every cent that they can earn. And the process was invented in the 20s where it was invested in legitimate businesses where money's illegal proceeds of crime could be then mixed with legitimate income. Laundromats were a favourite business back in those days, hence laundering money.
Jackie Blondell:
While Capone’s literal use of laundromats can be viewed as apocryphal, the term money laundering didn’t come into use until the 1970s. And what event ushered it into the lexicon? It was the Watergate scandal, where illegal campaign contributions were funnelled through Mexican banks.
The fallout of the affair led to President Nixon’s resignation.
As of 2025 AI security company Napier AI calculated the worldwide cost of money laundering as $5.5 trillion USD – around 5 per cent of global GDP. Breaking down that figure by country shows that economic heavyweights, the US, China, India and Germany are hardest hit in absolute terms by money laundering. For example, in the US, nearly 750 billion USD is laundered annually.
In Australia, it’s estimated that money laundering costs the Australian economy around $60 billion Australian dollars a year. This is money to cover specific crime and fraud. And which crime? Number one: Illicit drugs. Number two: tax revenue crimes. Number three: Government funded programs fraud. These crimes that predicate money laundering are high risk and, on the increase, according to a report on by AUSTRAC, Australia’s anti-money laundering and counter terrorism regulator and financial intelligence unit.
Since the AML/CTF ACT was enforced in 2007, AUSTRAC has been regulating around 19,000 financial businesses, banks, money service providers, gambling companies, and bullion dealers. Crypto currency dealers were added in 2018. For the first time in 2026 accountants, lawyers, real estate agents and dealers in precious gems and metal will be added, bringing the total number of reporters, as of July 2026 to around 100,000.
Here’s Brendan Thomas AUSTRAC CEO on the types of crimes that predicate money laundering.
Brendan Thomas:
We know the illicit drug market in Australia is worth more than $12 billion. We know the illicit tobacco market in Australia is worth more than $7 billion. So just those two crime types alone is close to $20 billion worth of illegal money in the Australian economy.
So every dollar of that is illegal. Every dollar of that is being laundered or needs to be laundered by somebody to try and make it look legitimate. And that's only two types of crime. When you throw on top of that taxation fraud, scams, cyber-crime, all sorts of other crime types, it's a much bigger volume of money. There's a lot of dirty money floating through the Australian economy.
Jackie Blondell:
It’s a common misconception that money laundering is a victimless crime. That’s far from the truth, notes Detective Sergent Kris Wilson of the Australian Federal Police’s Cyber Co-ordination Centre
Kris Wilson:
The term victimless crime gets thrown around a lot, it's far from the truth. And I mean, really the victims are front and centre, really, it's the community. I can sort of break it down in terms of the public sector. For example, in 2023, 2024, money laundering costs the public sector approximately $10.8 billion and the private sector $12.7 billion. Now, that's a considerable sum of money by any stretch of the imagination.
But when you break it down further, the community really suffers here, including businesses and financial institutions. So, legitimate businesses can be undercut or infiltrated.
Banks face financial losses, regulatory consequences and reputational damage when criminals exploit their systems, government departments and taxpayers, which is a large portion of the Australian population also suffer here as well.
What that can result in is reduced tax revenue, which increases the cost of policing and regulation. And that's just one cost that would then fall onto taxpayers as a result of money laundering. And then you have victims of the original crime itself, people harmed by scams, fraud, drug crime, any means of exploitation or corruption.
And effectively, what happens there is that the money laundering allows those crimes to remain profitable, which is why it's a continual battle from law enforcement to combat it.
Jackie Blondell:
Organised crime’s involvement in fraud of government programs such as the NDIS is an emerging worry. This is Amanda Wood, managing director of Kroll's Investigations, Diligence and Compliance Practice. She has more than 25 years’ experience in in anti-money laundering and counter-terrorism financing, including stints at AUSTRAC, APRA and Treasury.
Amanda Wood:
The government benefits provide a sort of honeypot to criminals if you can access government related benefits, then there's obviously welfare fraud and other things fraud in relation to the NDIS are all tied up in that sort of bucket when we're talking about that government benefits fraud. one of the things about Australia is we do a good job in being transparent around the threat environment. AUSTRAC and other agencies produce a lot of information, which is helpful to reporting entities to understand the types of threats that we're looking at.
Whether that extends into other jurisdictions, what I've seen with other countries in their national risk assessments and other things is that there's probably lower level of detail, particularly not so much in the larger economies, but in the smaller economies around the region.
And particularly, you don't see as much detail around the types of criminal threats that they might be exposed to.
So hard to say how it compares with other countries, but we do have in the Australian context, large public schemes such as the NDIS, which there's some fairly well-publicised concerns about fraud and other things happening through that scheme. So I think that all ties into the nature of the benefits that are provided in Australia, and then the attractiveness of trying to access those things by criminals and others.
Jackie Blondell:
How do money launderers ply their trade? The three-step process has barely changed for thousands of years. Remember the Chinese merchants using the flying money system? This was an early form of placement and layering of funds, a process still used today. Here’s Geoff Peck.
Geoff Peck:
The first element is placement. So this is where you need to introduce your ill-gotten and gains into the financial system. It might be structured deposits where you have small amounts of money in multiple bank accounts with banks to get the money into the financial system.
Once it's in there, then there's a process called layering. So this is where the distance is created between the illegal activities and the funds, transferring across jurisdictions, transferring across multiple bank accounts, purchasing assets that can then be resold.
It's just creating that distancing that can be quite complex.
And then there's integration where the criminals are satisfied that the money is clean enough to be able to then withdraw out of the banking system and either spend it, reinvest it in criminal activities or to go and buy assets.
Jackie Blondell:
To understand how this process works in practice, here’s a case Geoff Peck was involved with when he was at the Victoria Police. In this case, involving an organisation established in Nauru, cash was moved out of the country through various jurisdictions, cleaned and returned the country of origin, through a process known as round-tripping.
Geoff Peck:
In that case, an organisation was fraudulently induced to invest in a non-existent investment scheme and ultimately invested 60 million US dollars, but the first tranche of money was deposited in a lawyer's bank account in London. So that was the placement stage.
That money was then transferred from London to a bank in Switzerland, then from that bank in Switzerland back to London, then from that London account to an organisation set up in Antigua, but it had an account in Switzerland, so the money didn't actually go to Antigua, it just went to another account in Switzerland.
Then those monies were split into accounts in Northern Italy and the US. And then the Australian offenders repatriated money to Australia via Vanuatu and then were able to buy assets with it. So you can see the quite complex layering of just transferring around multiple jurisdictions, multiple companies, multiple bank accounts, then back into Australia via Vanuatu, pull it out of the system.
Jackie Blondell:
As you can imagine this nest of snakes took some time to unravel.
Geoff Peck:
We had to appoint an investigating magistrate in Switzerland to execute search warrants for the Swiss banks, the New York district attorney for the money that hit the US. It took us seven years.
Jackie Blondell:
And sending all that money back and forth across the globe had a major cost for the fraudsters; they had to pay the money launderers – and that didn’t come cheap. Here’s Geoff Peck again.
Geoff Peck:
Now in that case, it actually cost them eight and a half million dollars because it turns out they got most of their money, they got eight and a half million dollars stolen by other criminals. That is another risk that criminals find if they don't trust their money launderers, they can get ripped off themselves, which is what happened in that case.
Jackie Blondell:
As the Nauru case shows shell companies are used as vehicles in the money laundering process. They are also used for a variety of legitimate processes, including reverse merger, where a private company gains a controlling interest in a public shell company, thus avoiding the costly process of an initial public listing on the stock market. The trick, however, is sorting the legitimate from the illegitimate.
Here’s Dr Milind Tiwari, senior lecturer the Australian Graduate School of Policing and Security at Charles Stuart University in Canberra. His research expertise is money laundering.
Milind Tiwari:
There is no single rule to distinguish between them. It is actually an area of red flags which are involved. At times you would see some of the entities have a very complex beneficial ownership. There are cross-border transactions that are taking place, which does not align with the purpose for which the entity is incorporated. Similarly, there is no change in information in terms of their financial information, and suddenly you would see large amount of transactions taking place through those entities.
At times, you would see some of those entities being incorporated at the same address. So these are just some of red flags which requires further investigation. Not saying that it is a sure shot evidence that something is wrong, but yes, those are the starting points.
Jackie Blondell:
Bank capture or regulatory capture can be a stage the process. This is an extreme example of systemic regulatory failure. Banks are heavily regulated under anti-money laundering regimes around the world. When these failures are uncovered the fines are eyewatering.
Take the case of Danske Banke – which was fined 2 billion US dollars when suspicious transactions moving through its Estonian branch were spotted.
These transactions amounted to around 200 billion euros. During 2009 - 2014 more than 4.5 billion US dollars was drained from 1MDB, Malaysia’s sovereign wealth fund. Several international banks were implicated, one investment bank alone paid fines of 2.9 billion US dollars.
Closer to home, in 2020 a major Australian bank was fined 1.3 billion Australian dollars, for under-reporting more than 19 million shady foreign transactions. This was a record sum for Australia.
When it comes to bank infiltration by criminals, a 2024 case in Australia revolutionised money laundering detection methods.
AUSTRAC’s Fintel Alliance with the Big Four Banks and financial intelligence with the Western Australian Police set the investigative blueprint with Operation Taipan. This operation uncovered a syndicate using Australian bank intelligent deposit machines. When cash is deposited in these machines it’s instantly counted and immediately available. Geoff Peck explains how Operation Taipan worked.
Geoff Peck:
In late 2024, a very large money laundering syndicate was dismantled by Victoria Police. A person called Boliang Liu and his co-accused Tao Zhou, they laundered about $60 million between 2020 and 2021. And there was an undercover police operation where an undercover operative was talking to Liu wanting to essentially launder $100,000 into crypto.
And Liu said, "Look, I'm pretty busy at the moment, but when I'm dealing with my current client, I can handle about a million dollars a week." And they were just funnelling large amounts of cash through multiple ATMs and a whole bunch of different bank accounts.
Jackie Blondell:
In our next episode, we delve into how money mules operate, and the scams that lie behind the money laundering process. Also, how the metaverse is transforming money laundering and making the detection process a lot trickier. That’s next on crime by numbers.
