Aussie Banks Laundered $385M For Drug Cartels Amid Discrimination Against Bitcoin Traders

News / 19.01.2021

Many critics, including traditional financial institutions, have always argued that criminals use Bitcoin and cryptocurrencies for nefarious acts like washing dirty money, defrauding investors, financing terrorism, etc.

Barring Crypto Customers

Due to this, crypto traders in some parts of the world like Australia have trouble accessing banking services.  

Earlier this week, reports revealed that Australian bitcoin exchange operator Allan Flynn filed a $290,000 (AUD 375,000) lawsuit against two Aussie banks for closing his accounts because he deals with cryptocurrencies. 

Flynn alleged that about 20 of his accounts had been closed by more than five banks in the last three years for no good reason other than his bitcoin transactions. 

Westpac, one of the sued banks, told Flynn that it shut his account and he would not be allowed to open another account with the bank because he was “under investigation for cryptocurrency fraud.”

But Allan Flynn is not the only victim of this unlawful discrimination, as the report further revealed that other crypto enthusiasts have struggled with the same issue. One trader has even had his accounts closed more than 60 times, Flynn said.

Unknowingly Laundering Drug Money?

While Australian banks have been hostile towards crypto traders because of the stereotype that “Bitcoin is for criminals,” they have been busy washing dirty money for drug cartels without knowing, Australian Financial Review reported Tuesday. 

According to the report, nine unnamed Australian financial institutions alongside seven international banks “unknowingly” laundered $385M (AUD 500M) within three years for notorious violent South American cocaine cartels in an elaborate money-laundering network. 

The operation conducted between 2014 and 2017 saw the banks washing more than $77M (AUD 100M) annually before moving the funds to other countries in south-east Asia and the Middle East.

Trade-based Money Laundering

The illegal proceeds were washed through an advanced technique known as trade-based money laundering. After selling the drugs in North America, the proceeds were transferred to bank accounts in south-east Asia before moving through multiple accounts held in Aussie banks.  

In Australia, the illegal proceeds from drug sales were often used to purchase high-end electronics such as smartphones, smartwatches, digital cameras, laptops, gaming consoles, etc., which were then shipped abroad in containers. By doing this, the criminals were able to bypass authorities and conceal the origin of the funds.

“Invoices of the shipments sent overseas were deliberately undervalued. Once the goods arrived at their destination, they were sold for their proper face value allowing offshore collaborators to collect the profits,” the report said. 

The Australian Border Force (ABF), a syndicate of law enforcement agencies, started investigating the network after discovering the discrepancy in exporters’ and importers’ invoices.  

While the banks feigned ignorance of the money laundering operation that lasted for years, this is not the first time mainstream banks have been involved in criminal activities. 

In 2019, the United States customs official confiscated almost 18 tons of cocaine worth $1.3 billion on the vessel belonging to Wall Street bank JP Morgan

Mandy Williams joined the crypto space in 2016, and since then she has been learning and writing about cryptocurrencies and blockchain technology.