AML/CFT: Aus's "pokies" are easy meat for launderers: report

Casinos are well known as a money laundering technique: cash is introduced and then, without a bet being placed, a refund cheque is obtained.

That's why, after years of being a laundering system of choice for criminals from across South East Asia, Australia eventually got around to adding casinos into the list of businesses that must put in place measures to detect, deter and report suspicions of money laundering.

But Australia has a particularly strange love affair with the modern version of the one-armed bandit. Poker and similar slot machines are not just a way of life - they are increasingly being seen as a curse as addicts spend the housekeeping and mortgage money on the "pokies." Every so often, a socially aware group tries to increase the controls on them and - in extreme cases - to get them banned altogether.

But that's not going to happen for social reasons: users are only one side of the equation. Slot machines exist not because people like to play them but because the owners of the machines and of the premises that host them make money.

The machines are omnipresent in pubs, bars and hotels. Some have entire rooms given over to them. The machine operator and the premises share the profits.

In the old days, a one-armed-bandit would take your coins - perhaps low value coins at that. But now, they take bank notes.

According to the Sydney Morning Herald, a special feature that allows "banking" of deposits is how the money launderers work the system.

And in principle, it's just the same as the system using casinos.

Unlike casinos, the owners of premises with pokies do not have to undertake any form of customer identification. So a money launderer can stand at a machine and feed in notes to the value of several thousand dollars. He can press a button marked "reserve" and his money is "banked." The value of that bank fluctuates with his winnings and losses. If he plays.

But, says the report, money launderers simply use the machines to store cash - and then ask the hotel, etc. owner for a cheque for their current balance.

The owner of the premises cashes out the amount, providing the money launderer with a plausible excuse for having a cheque drawn on the account of the business.

AUSTRAC is already trying to find a way of fixing this problem, but finds it complicated.

Actually, it's not, says Nigel Morris-Cotterill, Head, The Anti Money Laundering Network (ultimate owner of BankingInsuranceSecurities.Com).

Morris-Cotterill says that there are three simple changes in the law that could stop the practice almost overnight.

"It's a simple matter to legislate that all payments out exceeding, say, AUD2,000 must be paid by bank transfer to an account in the name of the playing party and that payment of such sums is to be reported as a cash transaction report. The third change is that payment out of any such sum should be retained for 21 days during which time AUSTRAC would have time to analyse the payment and to frustrate it if necessary."

Morris-Cotterill says that Australia's counter-money laundering laws are excessively complex and that a major overhaul to simplify them would result in much reduced costs, not only for financial services businesses but also for all those businesses now brought within the reporting net.

"Unfortunately, despite all of the consideration given to making a supposedly comprehensive law, Australia's law makers forgot the basics," he says. "Most money laundering schemes are not complicated and there are a small number of variations on a few themes. Handing cash over and getting a cheque in return is the most simple and obvious technique: having recognised it in relation to casinos and bookmakers, it is surprising that the lawmakers did not extrapolate it to other forms of gambling."

The Anti Money Laundering Network www.antimoneylaundering.net