The big problem with selling drugs is not the supply and distribution side but what to do with the cash proceeds.
Suddenly having a large amount of cash is hard to explain and harder to wash, to make it appear it comes from a legitimate business.
AUSTRAC, the Australian Transactions Reports and Analysis Centre, receives about 84 million transaction reports a year.
From this data, it seeks to identify money laundering, the lifeblood of criminal gangs, and other activities such as terrorism financing.
One case it uncovered, and detailed in its 2013 case studies report, was an Australian drug syndicate which used multiple scams to wash its dirty money.
Trust accounts, a front company, high-value goods and real estate were used to launder the profits from cannabis sales.
The syndicate also used an accountant and solicitor.
The business model was simple, a case of arbitrage, the profit to be made by buying at one price and selling in a different location for a lot more.
As a cover, the syndicate bought a truck and rented a warehouse under a company name.
The truck was handy to move the cannabis interstate and as a structure to wash money through.
Here’s how they did it:
- Cash proceeds from cannabis sales went into the transport company’s account.
- A wages processing company was then engaged to pay syndicate members a wage from their new transport company. This then looked like legitimate wages of around $100,000 a year per syndicate member.
- Trust accounts and investment companies were then created. The syndicate gave an accountant $100,000 cash and told him to buy stocks in the name of the trust accounts and investment companies.
- One syndicate member also bought a property worth more than $700,000 in a family member’s name. The property purchase was financed using a mortgage.
- Over a two-month period the syndicate member paid more than $320,000 in 16 cash deposits to a solicitor (who provided conveyancing services and acted on behalf of the syndicate member in the transaction) to pay off the mortgage.
- The syndicate members also kept cash back to support their lifestyles by buying cars, jewellery, designer clothing and electronics.
The syndicate was undone when two suspect transaction reports alerted AUSTRAC which passed on the intelligence to the police.
One member of the syndicate was clocked making multiple cash deposits on the same day but at different bank branches in amounts just below the $10,000 cash transaction reporting threshold.
Authorities confiscated $600,000 of assets. Two members of the syndicate pleaded guilty to multiple money laundering and drug trafficking charges and both were sentenced to six years jail.
This chart shows the flow of money to from dirty to clean:
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