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Money Laundering

Aug 31, 2008
Money laundering was intended to catch large scale drug dealers, operators of crime syndicates and persons associated with these enterprises. Conveniently for the authorities it also has relevance to the area of tax crime including identity theft. Fraud or tax evasion has never had the reach the authorities want. Under the Crimes Act 1914 fraud was punishable for up to 20 years but under the Commonwealth Criminal Code 1995 it was dropped to 10 years as in the case of the deception offences.

Money laundering offences will catch promoters, professionals/intermediaries and participants. Its full force and effect is not only a maximum penalty of up to 25 years but the aggregation of money sums for independent dealings making it easier to reach the statutory thresholds eg. five transactions i.e. five dealings of $100,000 each means that as the aggregate amount involved exceeds $100,000 then it is much easier to reach the 20 year maximum for offences under $1.5M. In other words it is both the number of and amount of dealings involved which is used to such a devastating and telling effect as they go to the gravity of the offence.

Money laundering offences have been around since 1/1/2003. They have strengthened the arsenal available to the authorities to stem tax evasion and the use of tax havens. Although this area of the law is still developing it is obvious that the courts record large scale money laundering as a serious criminal activity which warrants severe punishment to reinforce general deterrence of a very significant degree. After all the courts need to send a message about what constitutes a significant degree of criminality and the Commonwealth Code 1995 underscores this.

The money laundering offences are broad and designed to catch a wide range of behaviours including fraud and a tax evasion. Herein lies the threat for Operation Wickenby participants as we have seen over the last four years. It has concentrated on offshore tax avoidance leading to some very highly publicised arrests in the area of tax fraud and money laundering. In essence money laundering is committed by a person if they:

Deal with money or other property which is a proceed or an instrument of crime; and are in a state of awareness that it is a proceed or instrument of crime.

Dealing with money includes concealing or disposing of money or receipt of money without the need to prove a banking transaction or engaging in a banking transaction. Under proceeds of crime which is an element of the offence property includes money or funds mixed with legitimate money or funds as well as the result of a sale or an exchange of money. Interestingly, it does not have to be proved that the money is the proceeds or instrument of crime. The courts are far more interested in what the offender did rather than proving the source of funds. They both look to:

- the amount of money involved;
- the number of transactions involved in committing the offence; and
- the period over which the transactions occurred.

Although the Anti-Money Laundering and Counter Terrorism Financing Act 2006 contains criminal sanctions it is the Commonwealth Criminal Code 1995 which criminalises money laundering and imposes the harshest criminal penalties. Fault is part of the package the consequences of which vary depending on whether it is intentional, reckless or negligent. Where the scheme or arrangement is a sham or mere contrivance this poses the greatest threat to the taxpayers as it is considered intentional since it lacks an underlying tax rationale and therefore attracts the heaviest penalties.

The Commonwealth Director of Public Prosecutions may prosecute for a range of charges and/or for proceeds of crime and/or money laundering. Obviously it makes more sense to go for the lot as this really carries the message about general deterrence and a significant degree of criminality. That said, money and property can be forfeited where there is no conviction for money laundering. Clients often think that where they are facing this situation evidence of prior good character will assist them to avoid prosecution for these offences. This couldn't be further from the truth as its relevance only becomes important during the final stages of proceedings when properly introduced

Should you be tax non-compliant and involved in any overseas tax minimisation schemes contact Frank Egan of LAC Lawyers for assistance as he has been retained by clients the subject of Operation Wickenby. As a leader in his field he has advised and represented a number of high profile taxpayers as well as those at great risk. Most tax advisers do not understand that there is a new paradigm operating in this space and unless advisers are currently engaged in the full spectrum of this work including the criminal consequences flowing from it they lack the necessary skills and experience to effectively represent clients. If you are at risk whether or not you are or may be a person of interest to the authorities then contact Frank Egan immediately. To delay is to adopt a position pregnant with risk.
About the Author
Frank Egan is the Chief Executive Officer of LAC Lawyers and has over 27 years of experience as a solicitor and specialises in complex business taxation matters & complex personal tax cases .
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