Money launderers go online

[R. A. Hettinga]

<http://australianit.news.com.au/common/print/0,7208,7134699%5E15319%5E%5Enbv%5E15306,00.html>

Australian IT

Money launderers go online
Simon Hayes
SEPTEMBER 02, 2003

LEGISLATION may be needed to help police and the Tax Office keep track of
transactions made using internet-based payment services, a government
watchdog has warned.

Officials from Austrac, which monitors the financial system and identifies
suspicious transactions, said there were many legitimate uses for
internet-based payments systems, but they could be misused to provide an
outlet for money laundering or tax evasion.

It was not a concern with alternative payment systems "but with the
potential to ensure that our law enforcement, revenue and national security
programs don't suffer", Austrac director Neil Jensen said.

"In the current system there's a chance it's not caught by the legislation."

Alternative online payments systems are growing in popularity, particularly
as a means of paying for internet auctions.

"All of these things developing now need to be looked at, and looked at
carefully," Mr Jensen said.

Austrac officials told a recent hearing of the joint parliamentary
committee on the Australian Crime Commission that the growing "array of
alternative payment systems", such as the popular e-gold, escaped reporting
requirements that caught bank-based transactions.

Deputy director Liz Atkins told the committee that systems such as e-gold,
which allows users to secure a cash deposit against gold held in a US vault
and then use it to make online purchases, were being used to evade
Austrac's network. "E-gold and other, similar types of mechanisms have been
of great interest, particularly to the Australian Taxation Office," she
said.

"People use them to avoid our reporting mechanisms on international funds
transactions.

"It is quite easy to use these mechanisms by buying e-gold and then having
credit cards or debit cards on international accounts so that our reporting
systems are completely avoided.

"There is quite a lot of concern within the broader law-enforcement
agencies, including revenue and regulatory agencies, about these sorts of
mechanisms."

Ms Atkins said web payment systems, in conjunction with foreign credit
cards, could help Australians avoid reporting transactions.

Mr Jensen said Austrac could track part of the transaction, since funds had
to pass through the banking system to be deposited in the account, but it
was limited in what it could do after the deposit was made.

New laws might be needed to bring non-bank payment systems under control,
he said.

Australian Institute of Criminology research deputy director Russell Smith
said the internet had made it far easier for people to avoid the
traditional banking system.

Although most alternative payments systems were US-based and subject to
strict regulation, much offshore banking took place in less regulated
countries.

"Part of the problem is harmonising regulations so different countries have
similar controls," he said.

"Some rogue states don't become involved, and thus can be used for criminal
purposes."

This report appears on australianIT.com.au.


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R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'