Australian authorities dismantle international money laundering syndicate

During an investigation into money laundering and drug supply, authorities in Australia have dismantled an international money laundering syndicate and charged seven people. As part of Operation Phobetor-Enyo, authorities identified a 37-year-old man in Vietnam allegedly running a money laundering syndicate offshore in New South Wales. According to a joint media release, the syndicate converted significant sums of cash into cryptocurrency for organized crime groups involved in drug trafficking.

Thus far in the investigation, detectives have seized 300 kg of illegal drugs, $2.8 million in cash, and 15 firearms.

About Operation Phobetor-Enyo

Formed in 2022, Operation Phobetor-Enyo was established as a joint task force comprising the New South Wales Police Force (NSWPF), the Australian Federal Police (AFP), the Australian Criminal Intelligence Commission (ACIC), and the NSW Crime Commission (NSWCC). Under the operation, the NSWPF Organized Crime Squad executed six search warrants on October 19, spanning five areas, including Bankstown, Double Bay, Lane Cove, Parramatta, and Umina Beach. 

Four men aged were arrested in Double Bay and Parramatta. Each has been charged with assisting in transporting and laundering funds on behalf of the international syndicate. In Lane Cove, a 64-year-old woman was arrested and charged with coordinating the operation on behalf of the offshore Vietnamese ringleader. In Umina Beach, two women, aged 26 and 27, were arrested, and the younger woman was charged with seven offenses, including:

• Four counts of knowingly dealing with proceeds of crime.
• Two counts of supplying prohibited drugs greater than or equal to large commercial quantity.
• One count of failing to comply with digital evidence access order direction.   

The 27-year-old woman, known for her appearance on The Bachelors Australia, was charged with supplying a prohibited drug in a commercial quantity, possessing a prohibited drug, and breaching bail conditions.

All defendants were refused bail until a court appearance.

Money laundering through cryptocurrency 

In 2022, criminals laundered around $23.8 billion through cryptocurrency exchanges, an increase of 68 percent on 2021 estimates. In Australia, it is also estimated that at least 70 percent of the country’s serious organized crime threats are “based offshore or have strong offshore links”. The crypto laundering trend has prompted a response from Australian regulators, which have moved to expand the range of digital asset-related services that are subject to anti-money laundering and counter-terrorist financing (AML/CTF) regulations in line with global Financial Action Task Force (FATF) Standards.

Separately, on October 16, 2023, the Australian Treasury announced that it plans to release draft legislation concerning licensing and custody regulations for crypto asset providers by 2024. Once the legislation is passed, exchanges will have a year to transition to the new regime.

Changjiang Currency Exchange

The scale of Australia’s crypto laundering trend was further brought to light on October 25, when the AFP made seven additional arrests following a 14-month investigation into Changjiang Currency Exchange, a retail money-transfer business. The police claim that the exchange helped criminals launder almost $230 million in illicit funds and tainted cryptocurrency over the past three years. Officers seized multiple luxury cars, including a $420,000 Mercedes-Maybach GLS, and a Balwyn North mansion valued at $10 million.

“The reason why this investigation was so unique and complex was that this alleged syndicate was operating in plain sight with shiny shopfronts across the country – it was not operating in the shadows like other money-laundering organizations,” said AFP Assistant Commissioner Stephen Dametto.

According to the police, the majority of Changjiang’s customers used their services for legitimate purposes such as foreign currency exchange and sending money overseas. However, the police also allege that Changjiang collaborated with criminals to conceal the proceeds of criminal activities, including online scams and trafficking of illicit goods, and transfers money in and out of Australia.

The AFP claims the gang had been coaching criminals on how to create fake paperwork, such as false invoices and bank statements, to hide the origins of their money. Additionally, the AFP alleges that criminals have been charged higher fees than ordinary customers.

Crypto laundering red flags

To detect and prevent money laundering, compliance teams at cryptocurrency service providers should be vigilant for suspicious transactions and suspicious customer behavior. In 2020, the FATF published a report outlining the red flag indicators of crypto laundering, including:

• Transactional behavior: Cryptocurrency service providers should exercise caution when dealing with multiple transactions in small amounts, transactions that do not align with a customer’s risk or wealth profile, regular transactions that frequently result in losses, or frequent transactions of fiat to cryptocurrencies with no clear business justification. It is important to be vigilant and identify any suspicious activity to prevent potential fraud or illicit activities.
• Customer identity: It is common for individuals to attempt to exploit the anonymity benefits of cryptocurrency through customer identification measures. There are several red flags that may indicate such behavior, such as having multiple exchange accounts controlled from the same IP address, inconsistencies in identifying documents during account creation, or frequent changes in identifying information. These issues can serve as warning signs for potential exploitation.
• Money mules: Customers who make deposits that are inconsistent with their wealth profile or who are not familiar with the financial products they are using may be being used as money mules. 
• Source of funds (SoF): Cryptocurrency exchange service providers should also scrutinize the sources of cryptocurrency funds for indications of money laundering. Funds from sources linked to illegal activities, darknet sites, sites with inadequate AML controls, and sites located in countries known to present a high AML risk may be considered red flags.