December 2010, Gold Coast Queensland:

A group of 9 cashed-up Russian nationals flew in from Irkutsk, Siberia, ready to celebrate New Year's Eve in Australia. Their visa application forms stated that they were all employees of a gemstone mining company in Russia.

During their stay, two of the party visited the ANZ Bank in Surfers Paradise and opened two debit card accounts. The coming weeks and months saw the opening of 24 more bank accounts. In the weeks and months following, hundreds of thousands of dollars were deposited into the accounts, which, by December 2013, totalled approximately $30 million.

Transaction records obtained from the bank show that the Russian nationals liked to shop and had expensive tastes, including luxury retailers, first class travel and jewellery.

Australia's AML/CTF regime was implemented to address the threats that money laundering and terrorism financing pose to national security and the integrity of key sectors of the economy, and to bring Australia into compliance with international AML/CTF standards developed by the Financial Action Task Force (FATF).

Australia's AML/CTF regime comprises the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (the Act) and the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No.1) (the Rules).

Organisations or 'reporting entities' which fall within the ambit of the AML/CTF regime (such as banks, financial services providers, the gambling industry and money service providers) are required to comply with various obligations. Compliance with these obligations is overseen by the Australian Transaction Reports and Analysis Centre (AUSTRAC).

Back on the Gold Coast:

Unsurprisingly, the scale of the amounts deposited alerted the Australian authorities to investigate the Russians and their transactions. Further, the bank determined that there was no reasonable explanation as to the source of the funds deposited – according to their visa applications, the highest-paid of the group stated that their annual income was $65,000.00. Investigations found that the money deposited in the Gold Coast accounts was traced to 8 foreign companies with bank accounts in Hong Kong and China.

In December 2013, as a result of its investigation, and with the co-operation of the Surfers Paradise bank, the Australian Federal Police froze all of the Gold Coast bank accounts. Although the Russian nationals are no longer in Australia, they have been ordered by the Queensland District Court to provide sworn statements explaining the source of the funds. Failure to do so will lead to their $30 million fortune to be confiscated by the Government.

As well as the reporting of funds transfer instructions and the identification of customers, an important obligation for reporting entities is to ensure that Part A of their AML/CTF program is subject to regular independent reviews. We conduct AML/CTF reviews for clients in a range of businesses and we often see the same issues emerging. In our experience, independent reviews, as well as being a requirement of the legislation, provide reporting entities with an effective summary of how their AML/CTF compliance is tracking and how they can improve it.

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