Money laundering

[65-200] The Commonwealth statutory scheme

The Commonwealth money laundering offences are found in Ch 10, Pt 10.2, Div 400, ss 400.3–400.9 Criminal Code 1995 (Cth). The name of Pt 10.2 is “Money laundering”.

When a court is sentencing for any of these offences, the relevant statutory provisions are of particular importance. The statutory scheme has a graduated series of offences varying in gravity depending on the value of money or property and the offender’s state of mind: R v Li (2010) 202 A Crim R 195 at [17]-[19], [41].

Sections 400.3–400.9 provide for a number of different offences, the seriousness of which is indicated by the maximum penalty, the amount of money involved and the mental (fault) element to be proved for the particular offence. Each offence is concerned with money or property that is the proceeds of crime or money or property that is to become an instrument of crime. The greater the sum of money involved the more serious the offence as indicated by a higher maximum penalty: R v Ansari (2007) 70 NSWLR 89 at [122]; R v Li at [41]. It is the primary identifier of what is the maximum penalty for an offence: R v Huang (2007) 174 A Crim R 370 at [34]; R v Li at [41]; R v Guo (2010) 201 A Crim R 403 at [87], [89]. The value of money or property and the offender’s state of mind are the principal differentiating factors in determining the seriousness of these offences: R v Guo at [85]-[91]; R v Li at [18], [41]; R v Ansari at [122].

The considerations relevant to the seriousness of a Commonwealth money laundering offence were summarised in R v Ly (2014) 241 A Crim R 192 at [86] with reference to several cases.

[65-205] Breadth of conduct caught

The money laundering offences are broad with the capacity to apply to a large range of activities relating to money or other property to be used in connection with, or arising from, serious crime. The offences are not only concerned with the source of the money or property dealt with but also its ultimate use. The offences cover money obtained illegally or to be used for illegal purposes or dealt with in a manner that is illegal. At the Commonwealth level, these offences “constitute a 21st century response to antisocial and criminal conduct commonly with international elements”: R (Cth) v Milne (No 1) [2010] NSWSC 932 at [164], adopted in Milne v R (2012) 219 A Crim R 237 at [132]–[135]; R v Ansari (2007) 70 NSWLR 89 at [119]–[122]. See also Thorn v R (2009) 198 A Crim R 135 at [30], [31].

The breadth of conduct caught by these offences makes it difficult to identify an offence falling within the worst category of its kind (as that concept was understood prior to The Queen v Kilic (2016) 259 CLR 256): R v Ansari at [120]. In R v Ansari, Howie J identified possible factual scenarios encompassed by these types of offences: from those situations where the money that was being dealt with was to be used for the purposes of terrorism, to money obtained as a result of drug activity (which he thought the most obvious example), to money legitimately earned but being dealt with in such a way as to disguise its source to, for example, defraud the tax office:the [120].

Examples of conduct that have given rise to a money laundering offence are: making numerous transfers of funds overseas in amounts less than $10,000 using numerous false identities (Jimmy v R (2010) 77 NSWLR 540); an elaborate tax avoidance scheme involving the establishment of sham companies and the making of cash payments to workers in a chicken factory (R v Guo (2010) 201 A Crim R 403); organising a number of people to make cash deposits totalling $15 million which was directly or indirectly transferred overseas (R v Nguyen (2010) 204 A Crim R 246); swapping shares in one company for shares in another without a change in legal ownership which was intended to avoid capital gains tax liability (Milne v R); receiving money for the provision of child pornography material to others and the transfer of a significant portion of that money overseas to others involved in the offence (Dennison v R [2011] NSWCCA 114); laundering the proceeds of a fraud perpetrated on a superannuation scheme by exchanging funds in a bank account for gambling chips which were later cashed in (Wang v R [2013] NSWCCA 2); completing and lodging numerous tax returns using the personal identity details of other people (including their tax file numbers) and claiming, and receiving, tax refunds on the basis of falsely inflated tax payments and deductions (R v Ly (2014) 241 A Crim R 192).

The offending in Dickson v R [2016] NSWCCA 105 is an example of very serious money laundering. The offender was sentenced to 12 years for that offence (against a maximum penalty 25 years). It involved the offender controlling the movement of over $63 million overseas, of which over $19m was distributed to the offender or entities associated with him. The money was obtained from a complex tax fraud scheme he had devised and in respect of which he was separately charged.

[65-210] Sentencing range

At this stage, sentencing decisions for money laundering offences provide assistance as to statements of general principle but do not identify a range of appropriate sentences: R v Li (2010) 202 A Crim R 195 at [40]; R v Guo (2010) 201 A Crim R 403 at [86]; Milne v R (2012) 219 A Crim R 237 at [291]; Ihemeje v R [2012] NSWCCA 269 at [86]. The existing cases provide no more than an indication of developing sentence practice: R v Li at [40]; R v Nguyen (2010) 204 A Crim R 246 at [58]. The offences “comprehend such a wide range of criminality that there is bound … to be an appreciable variation in the length of sentences within and between them”: R v Li at [41]. This wide range of circumstances means that comparisons with the sentences imposed in other money laundering cases are of limited assistance: Wang v R [2013] NSWCCA 2 at [33]. The Victorian Court of Appeal confirmed in Majeed v R [2013] VSCA 40 that the sentences for s 400.3 offences in previous decisions “are too few in number to provide anything but the broadest outline of the appropriate range of sentence”: at [40].

Notwithstanding the difficulties associated with identifying a sentencing range, the sentences imposed in past matters may assist a court in determining the appropriate sentence. So much is apparent from the court’s careful examination of past money laundering cases, its discussion of the relevant sentencing principles and of the interrelationship between the two in light of the particular circumstances of the offence and offender in R v Ly (2014) 241 A Crim R 192 at [88]ff. See also Dickson v R [2016] NSWCCA 105, where the court undertook a similar exercise to determine a Crown appeal against sentence: Dickson v R at [187]–[192].

[65-215] The application of the De Simoni principle to the statutory scheme

As to the general issues which may arise in relation to the application of the principle in The Queen v De Simoni (1981) 147 CLR 383 see [1-500]. The De Simoni principle will arise because of the way the Div 400 offences have been structured. There is a direct connection between the offender’s state of mind (established by proving the relevant fault element) and the maximum penalty. For example, the maximum penalty for an offence against s 400.3(1), where the prescribed fault element is intention, is 25 years whereas when the prescribed fault element is recklessness (as in s 400.3(2)) the maximum penalty is 12 years. Section 5.4(4) Criminal Code provides that proof of intention or knowledge will also satisfy the fault element of recklessness. A failure to maintain the distinction between a less serious offence involving recklessness and a more serious offence involving belief contravenes the De Simoni principle: Chen v R [2009] NSWCCA 66 at [23]; R v Ansari (2007) 70 NSWLR 89 at [131]. In Chen v R, while the judge’s finding that the applicant knew the funds were illegally obtained influenced his resolution of the dispute concerning the applicant’s role it had no other bearing on his assessment of the offender’s criminality and, accordingly, did not breach the De Simoni principle: at [25]. Although the sentencing judge in Wang v R [2013] NSWCCA 2 referred to the offender’s knowledge, his Honour specifically recognised the distinction in Chen v R between the offence involving recklessness and the more serious offence involving belief: Wang at [42]–[43]. A finding that the offender knew the origin of the money involved was drug trafficking would offend the De Simoni principle because it amounted to finding the offender had committed a more serious offence: R v Viana [2008] NSWCCA 188 at [30]. However, finding the offender was reckless as to the source of the funds being the importation or sale of drugs did not infringe that principle: R v Viana at [30] and [31]. In Shi v R (2014) 246 A Crim R 273, the sentencing judge was found to have committed a De Simoni error by taking into account, for an offence contrary to s 400.9 (which only requires that it may be reasonable to suspect that the money or property is the proceeds of crime), that the offender had known that the money was the proceeds of crime.

[65-220] General deterrence

Any sentence must reflect general deterrence to a very significant degree because, notwithstanding the varying degree of gravity, money laundering is serious criminal activity and justifies severe punishment: R v Huang (2007) 174 A Crim R 370 at [36]; R v Guo (2010) 201 A Crim R 403 at [91], [103]; Majeed v R [2013] VSCA 40 at [39], [44]. General and specific deterrence is of particular importance where there is a pattern of illegal activity by an offender over an extended period using false identities: R v Guo at [96]; Van Haltren v R (2008) 191 A Crim R 53 at [87].

[65-225] Factual findings as to role and what the offender did

A significant consideration for the court is the role played by the offender where a criminal hierarchy has been discovered. An analogy has been drawn between money laundering offences and drug importation offences. Both usually reveal a hierarchy of persons involved in the conduct with different roles to play and different gains to be made from the commission of the offence: R v Ansari (2007) 70 NSWLR 89 at [119]; R v Assafiri [2007] NSWCCA 159 at [17]. Sentences should be higher for offenders who obtain higher rewards and have a lower risk of detection than persons lower in the hierarchy whose criminality is lesser and who run a higher risk of detection: Ihemeje v R [2012] NSWCCA 269 at [63], [87]. The most important consideration when sentencing for a money laundering offence is to consider what the offender did because there may be little evidence concerning the organisation behind the offence, the source of the funds or the ultimate use to be made of them: R v Ansari at [119]; R v Guo (2010) 201 A Crim R 403 at [88]; The Queen v Olbrich (1999) 199 CLR 270 at [19]. Where there is no evidence about the offender’s knowledge as to the source of the funds, the purpose of dealing with them, or their ultimate destination, the court must deal with the matter on the basis of objective facts proved by evidence: R v Ansari at [124]; Ungureanu v R [2012] WASCA 11 at [42].

[65-230] Relevance of offender’s belief and fault element

An important consideration is the offender’s belief as to the source of the funds regardless of whether the offender is charged with an offence concerned with the proceeds of crime or an offence concerned with property being used as an instrument of crime. Where it is the latter, the belief as to the source of the funds or its nature is less relevant because those offences are directed to the use to be made of the funds: R v Huang (2007) 174 A Crim R 370 at [32]–[33]; R v Guo (2010) 201 A Crim R 403 at [89]; Ungureanu v R [2012] WASCA 11 at [43], [91]. The offender’s understanding of the destination of the money or the purposes for which it was to become an instrument of crime is also relevant although this is not decisive of the seriousness of the particular offence or appropriate penalty: R v Huang at [33]. In R v Huang, the offender’s belief that he was actively involved in dealing with the money to evade the payment of tax was a significant aggravating factor.

The offender in Majeed v R [2013] VSCA 40 argued that the sentence imposed on him for dealing with more than $1,000,000 and being reckless as to whether that was the proceeds of crime was manifestly excessive given the maximum penalty, his role and his strong subjective case. The submission was rejected on the basis that the offender’s mental state was “at the highest end of recklessness”. Given the type of criminal activity in which he was involved (the central contact between a drug trafficking syndicate and a money laundering syndicate), a sentence amounting to more than 50% of the maximum penalty of 12 years was not excessive: [42], [43], [51].

[65-235] Other factors

The number of transactions and the period over which the transactions occurred are significant because they indicate the extent of the offender’s criminality: R v Huang (2007) 174 A Crim R 370 at [35]; R v Li (2010) 202 A Crim R 195 at [41]; R v Guo (2010) 201 A Crim R 403 at [87], [89]. Generally, a number of transactions involving small amounts of money will be more serious than a single transaction of a larger amount as the latter may be seen as an isolated offence: R v Huang at [35]. Whether the money or property belongs to the offender or someone else, the degree of planning involved and the actual loss that resulted are important: R v Li at [41]; R v Guo at [87].

The use of false identities to facilitate the criminal activity elevates the objective criminality of an offence: R v Guo at [96].

[65-240] Character

An offender’s prior good character is of less significance than might otherwise be the case when the activity is engaged in for profit, over a significant period of time and involves a large number of transactions: R v Huang (2007) 174 A Crim R 370 at [36]; R v Guo (2010) 201 A Crim R 403 at [89].

[65-245] Relevance of related offences

Sentences imposed for structuring offences under the Financial Transaction Reports Act 1988 (Cth) are not a “helpful guide” to the appropriate sentences for the more serious offences in Div 400. This is not just because of the different maximum penalties prescribed for the different offences but because, depending on the extent of activity engaged in by an offender and their knowledge of the purpose of particular transactions, the criminal activity may be imbued with a completely different complexion”: R v Huang (2007) 174 A Crim R 370 at [37]; R v Edwards; Ex parte Director of Public Prosecutions (Cth) (2008) 183 A Crim R 83 at [21].

[65-250] Financial Transaction Reports Act 1988

Offences against s 31 Financial Transaction Reports Act 1988 (Cth), commonly referred to as “structuring offences”, involving the transfer of amounts of less than $10,000 to avoid reporting requirements, fall within what is commonly understood as a “money laundering” offence: R v Guo (2010) 201 A Crim R 403.

The Financial Transaction Reports Act is directed at regulating the cash economy, which can facilitate tax evasion and money laundering. The Act’s principal object, set out in s 4(1), is to facilitate the administration and enforcement of taxation laws. A further object, set out in s 4(2), is to facilitate the administration and enforcement of laws of the Commonwealth other than taxation laws: R v Guo at [92]; R v O’Driscoll (2003) 57 NSWLR 416 at [13]-[14]. In addition, the legislation is intended to enable law enforcement agencies to monitor the movement of large amounts of cash and identify tax evaders and the recipients of proceeds of crime: R v Guo at [93]; Leask v Commonwealth (1996) 187 CLR 579 at 596-597.

Sentencing decisions for financial reporting offences provide assistance by way of stating the general sentencing principle but do not identify a range of sentence: R v Guo at [97].

Justice Johnson summarised the relevant sentencing principles for these offences in R v Guo at [92]-[97] as follows:

  • Such offences are difficult to detect and call for a significant degree of general deterrence: R v Guo at [94]; R v Au [2001] NSWCCA 468 at [7]; R v Narayanan [2002] NSWCCA 200 at [89]; R v Rule [2003] NSWCCA 97 at [9]–[10]; R v Edwards; Ex parte DPP (Cth) (2008) 183 A Crim R 83 at [2].

  • The use of a false identity to facilitate the criminal activity can elevate the level of objective criminality. General and specific deterrence are particularly important where there is a pattern of illegal activity by an offender over an extended period using a false identity: R v Guo at [96]; Van Haltren v R (2008) 191 A Crim R 53 at [87].

  • The Act is a useful tool against the anti-social practices of organised crime and public corruption, including exploitation of workers in circumstances constituting an offence against the Act: R v Guo at [95]; R  v Edwards at [3].