What Is Money Laundering and Why Should You Care?
Placement, layering, integration — the three stages every professional needs to recognise. With real Australian cases from AUSTRAC's CEO.
Money laundering is the process of making illegally obtained money look like it came from a legitimate source. That's it. Criminals earn money through crime — drugs, fraud, tax evasion, scams — and they need a way to spend that money without attracting attention. That process is money laundering.
The scale in Australia: Drug dealing alone generates at least $12 billion every year in Australia. Every dollar of that is illegal and every dollar needs to be laundered. And that's just one crime type. In 2023–24, serious and organised crime cost Australia up to $82.3 billion — that's 3.2% of GDP.
The three stages
Money laundering almost always follows three stages. Understanding these helps you recognise when something doesn't look right — which is the entire point of your obligations under the AML/CTF regime.
Stage 1 — Placement
Getting the dirty money into the financial system. This is the riskiest stage for the criminal because cash is hardest to explain. They might deposit it in small amounts across many bank accounts, use it to buy assets, or funnel it through a business. This is where professionals like you come in — criminals may use your trust account, ask you to establish a company, or route funds through a property transaction to get the money into the system.
Stage 2 — Layering
Moving money through complex transactions to obscure its source. The money gets transferred between accounts, converted into different assets, moved through shell companies, routed through loan agreements or consulting fees. The goal is to create so many layers that nobody can trace the money back to its criminal origin. Straw directors, nominee shareholders, and offshore accounts are all layering tools.
Stage 3 — Integration
The money now looks legitimate. It's used to buy property, invest in businesses, or fund a lifestyle. At this point, it's extremely difficult to distinguish from lawful income. A Tasmanian drug dealer used a lawyer's trust account to conceal proceeds of crime in a real estate transaction — by the time the property was purchased, the money appeared clean.
A real case: the $10 billion underground bank
AUSTRAC's CEO shared this example at a recent panel event. An organised crime group dismantled by the Australian Federal Police operated what was essentially an underground bank. It moved an estimated $10 billion over 4 years and had the capacity to move up to $1 million per hour.
The operation was so large it set its own international exchange rates. It used digital currency trading, domestic and foreign shell companies, and multiple offshore bank accounts to make funds available almost anywhere in the world within 24 hours.
This is not a theoretical risk. These are real organisations, operating in and through Australia, that are actively looking for gaps in financial controls. The lack of money laundering controls in non-financial businesses has created — in AUSTRAC's words — "significant holes that many criminals are simply walking straight through."
Why professionals are targeted
Criminals don't just use banks. They specifically seek out lawyers, accountants, real estate agents, and conveyancers because these professionals provide services that make transactions look legitimate. A company set up by a law firm looks more credible than one set up anonymously. A property transaction conducted through a conveyancer's trust account looks routine.
AUSTRAC's CEO shared another case: a senior partner at a medium-sized law firm was introduced to a client by a bank director. She agreed to act for the client and skipped her usual due diligence checks because the client had accounts with major banks and was recommended by a regulated professional. She acted for him in straightforward commercial matters for three years.
Then the police called. They were investigating the client for suspected involvement in a fraud ring. Shortly after, the client asked her to transfer a significant sum from her trust account to an overseas bank. She felt uncomfortable but felt she had no choice but to follow his instructions.
The lesson: If she'd done proper customer due diligence at the start — even basic checks — she might have identified the risk before she was three years deep in a professional relationship. And she would have had an obligation to file a suspicious matter report when the police contact occurred, rather than feeling trapped.
Why Australia is doing this now
Australia is one of the last developed countries to extend AML/CTF regulation to professional services. The only countries that still haven't are China, Madagascar, Haiti, and the United States. The global standard is set by the Financial Action Task Force (FATF), which evaluates every country's compliance — and Australia's 2015 report card was not good.
FATF is assessing Australia again starting this year. The reforms passed in November 2024 are designed to close the gap before that assessment. If Australia is seen as a weak link, it becomes a target for global criminal networks — and risks other countries increasing the cost of doing business with us.
Bottom line: This isn't just regulatory compliance. Australia's open economy, stable legal system, and strong property market make it attractive for legitimate business — and for criminals looking to park dirty money. The AML/CTF regime is designed to keep professionals from being the unwitting bridge between those two worlds.
This article draws on public statements by AUSTRAC's CEO Brendan Thomas and industry experts across multiple events. Key sources:
Disclaimer: This article is published by GetPost Labs Pty Ltd, a technology company building compliance software. All content is for educational purposes only and does not constitute legal, financial, or compliance advice. While we make every effort to ensure accuracy, this article may contain errors or omissions. Always refer to the authoritative text on legislation.gov.au and seek professional advice for your specific circumstances. If you spot an error or have a suggestion, please reach out to sumit@getpostlabs.io.