CLAW6031 Week 2 Money Laundering Risks Problem Question/Hypothetical –
ANSWER 2022
John Lau, who lives in China, is planning to study at Trumpet University in Australia. John is
very close to Mo, his "uncle", and will do anything to please him. Mo has a gambling business
which operates in China; this business is a crime in China but would not be a crime if the
gambling business was in Australia. Mo gives John $A100,000 sourced from his criminal
gambling business and asks John to take the cash on his plane trip to Australia. The Australian
dollars are likely to have been purchased through an underground foreign exchange dealer in
China. John is also given $A30,000 by his parents from their savings to finance his education.
John does not declare $A130,000 to Australia Border Force/Customs when he enters Australia.
Mo requests John to deliver the $A100,000 cash to ‘Mary Wesley’, a person whom John has no
previous knowledge, at an address in Sydney. John delivers the cash to ‘Mary’.
Mo also requests John to open up bank accounts in Sydney so that Mo can send John more
money. John opens up accounts at Yamba Bank but uses a false passport as his identity
document. John deposits some of his parents’ cash in Yamba Bank by making individual cash
deposits over three weeks. The deposits are $A4,000 in week 1, $A5,000 in week 2, $A9,000 in
week 3.
Mo sends by electronic means (ie wire transfer) $A500,000 to John's account at Yamba Bank,
telling John that he can keep $A25,000, but that he must immediately transfer the remaining
$A475,000 to an account in the name of Moses Pty Ltd at Wale Bank in Melbourne. John
transfers the $A475,000 as requested.
Three months later, the Australian Federal Police request an interview with John to discuss his
financial transactions

ANSWER THE FOLLOWING QUESTIONS
1 Identify the financial crimes risks, including money laundering risks in both China & Australia
2 Identify the stages & techniques of money laundering. .
Students can examine this hypothetical from both a Chinese financial crime perspective and an
Australian financial crime perspective
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SUGGESTED ISSUES TO BE RAISED IN THE HYPOTHETICAL
This is a very comprehensive answer. At this stage of the course, students are only expected to
raise a few of the issues.
A Identify the financial crimes risks, including money laundering risks
It is important to identify and, if possible, comment on all the financial crime risks arising from
the hypothetical. Note that risks may include conduct which is not necessarily a crime. Risks are:
criminal risk (criminal offence) civil risk (litigation by a person who is a victim of the offence, or
and third party), regulatory risk (risk that the regulator might take some action), reputational risk.
2

At this stage of the course, it is not important whether the students know whether specific
transactions or conduct is criminal, but they should at least attempt to identify transactions that
are problematical.
Transactions in China
Mo gives John $A100,000 which is sourced from a criminal business in China. Both Mo and
John may have financial crime risks arising from this transaction under Chinese law.
Mo is likely to have purchased the Australian dollars from an underground foreign exchange
dealer in China. This transaction is likely to be a crime in China. We study alternative remittance
systems (including China’s underground banking system) in a later lecture.
At the request of Mo, John exports from China the $A100,000, as well as $A30,000 given to him
by his parents. This may give rise to breaches of China’s foreign exchange/currency control law.
Under China’s foreign exchange law, there is a limit on individuals taking our more than
$US50,000 (or the equivalent in any foreign currency) each year.
Transactions in Australia
John has not declared $A130,00 to Australian Border Force/ Customs when he entered
Australia. It is a crime in Australia not to declare $A10,000 or more in cash/currency when
entering Australia. We examine this further in our lecture on regulation of money laundering.
John has delivered $A100,00 cash to ‘Mary Wesley’, a person who he has no previous
knowledge. John has carried out no due diligence on a person whom he has delivered $A100,000
in cash. This raises the distinct possibility that John is involved in a money laundering operation.
By not asking questions of Mo or Mary, John is taking the risk that he is part of a money
laundering transaction, with John’s role as a money courier (‘money mule’). We will study the
elements of the crime of money laundering under Australian law later in this course – here John
may have engaged in negligent money laundering.
John opening up accounts at Yamba Bank by using a false identity document (i.e a false
passport) is a crime under Australian law. We will study this issue further under regulation of
money laundering.
John has structured the deposits into his accounts at Yamba Bank (see discussion below).
John’s account at Yamba Bank has received $500,00 by wire transfer from Mo. There are two
issues raised by this fact: is the $A500,000 proceeds of crime under Australia law? Has John
committed the criminal offence of money laundering by just receiving money into his bank
account? At this stage we are asking questions; we make no attempt at giving an answer because
we do not have sufficient facts and we do not have any knowledge of the facts. We will study
this issue later under criminal liability for money laundering.
John has immediately transferred $A475,000 from his bank to an account in the name of Moses
Pty Ltd at Wale Bank in Melbourne. Similar questions can be asked concerning whether the
transfer of the monies gives rise to criminal liability on the part of John.
B Identify the stages of money laundering and the money laundering techniques.
We will only consider the transactions in Australia.
3

The deposit of $A30,000 cash into John’s bank account at Yamba bank may be considered to be
the placement stage of money laundering.
John has used various techniques of money laundering. Firstly, he has used a false identity
document in opening and operating an account so as to conceal his identity from Yamba Bank
and ultimately from Australian law enforcement.
Secondly, John has used the structuring technique/smurfing by making deposits into his
accounts of $4,000 in week 1, $A5,000 in week 2 and $A9,000 in week 3. Why did John not
deposit the $A18,000 in one transaction? It appears that John’s purpose in structuring his cash
deposits is to prevent the bank from filing a threshold transactions report (TTR). Under
Australian law, banks are required to file a TTR if $A10,000 or more cash is deposited into an
account. We will learn more about the criminal offence of structuring later in this course.
The transfer by John of $A475,000 from his bank account to an account in the name of Moses
Pty Ltd at Wale Bank in Melbourne may be viewed as the layering stage of money laundering.