In Hong Kong, it's estimated tens of billions of dollars are illegally laundered every year.
HK money laundering laws catching wrong folk: former police head (Credit: ABC)
Much of it is crime or drugs-related money funnelled from China or the gambling haven of Macau.
A year ago, Hong Kong introduced tough new legislation - the Anti Money Laundering Ordinance - but so far it only seems to have captured those at the bottom of the criminal hierarchy.
Speaker: Steve Vickers, chief executive of Steve Vickers and Associates, and former head of the Royal Hong Kong Police Criminal Intelligence Bureau
VICKERS: An old lady, old's probably the wrong word, but a 61-year old illiterate public housing tenant was sentenced to ten years for her role in money laundering and a 19 year old. I mean that's fine if that was the whole story, but these are obviously very small cogs in a much larger wheel. Hong Kong has a very proud history of anti-narcotics efforts, it was one of the first countries in the world that pursued the proceeds of drug trafficking very successfully. The new anti-money laundering law that has come in I think has caught the wrong end of the net as it were, it seems to be catching the very, very low end people instead of those involved in moving billions of dollars out of China, typically using underground banks and the junket casino or the junkets working closely with the casinos, which are obviously moving very large sums of money out of China. So the point is not that the law isn't a good one, the point really is "are the right people being targeted"?
MCCARTHY: Of course you're saying it's not so much a question of whether or not the law is good and of course it only has been in for one year now. But why is it that the bigger banks and criminal syndicates are so hard to catch out?
VICKERS: Well, I guess also one needs to look at there's a current paranoia in the world over money laundering. To my mind money laundering in its true sense should be the proceeds of crime, be it narcotics, child prostitution or other abhorrent crimes that the goal would be to intercept the proceeds of those. It's sort of morphed in the world in the war on terror and now into tax evasion, into a sort of general attack on offshore money. The interesting thing about both of these two cases is that we didn't actually see what the source of those funds were. So it's difficult to tell whether people are going to jail for dealing with the proceeds of narcotics, or whether this is more of a currency, people moving sums of money to defeat currency regulations from inside China, and I think that's a problem.
MCCARTHY: And obviously it concerns you far more if it's coming from proceeds of crime such as drugs and illegal gambling, than if it is simply evading currency regulations?
VICKERS: Right. But prosecuting people without reference to where it came from is to my mind from a policy point of view and from a legal point of view, fairly irrelevant. The goal is to target the primary organised crime figures or corrupt officials whose money is moving. And obviously if people conspire to assist them in that then they are guilty of an offence also. But simply prosecuting very low end cogs in the establishment is not really helping anybody.
MCCARTHY: One of the striking features of these cases that have been discovered is that these large transactions went undetected for so long. What does that tell you about Hong Kong's banking system? Why wasn't this picked up sooner?
VICKERS: Hong Kong has a world-class banking system, the question really is whether these transactions even are the proceeds of crime. Also what I suspect is there were hundreds if not thousands of very small transactions, probably calculated not to draw attention. So I think the lesson from this from the bank's point of view will be to looking at the total number of transactions, as opposed to individual transactions, which is probably where they fell down here.
MCCARTHY: One of those who perhaps couldn't be described as small fry is Carson Yeung, who's a tycoon and the owner of the English soccer club, Birmingham City. He'll go on trial later this month. Is that a positive sign that some of the more complicit figures are being targeted?
VICKERS: Well, I can't comment on any given individual case, particularly if it hasn't gone to court yet. But not really, that's the only case I've seen, ok albeit the new law's only been in for a year, but do bear in mind Hong Kong has got a very strong and robust legal system already that's been targeting for many years narcotics trafficking. One of the big issues is Macau and the junket operators who operate from Macau. Last year $39 billion US officially was wagered in Macau according to Macau government statistics. Our information suggests that the actual number gambled may have been five or six times that, which is a vast amount of money and that money is leaving China through inappropriate or illegal channels. That's actually an interesting area, targeting those sort of people rather than a 61 year old illiterate housewife and a 19 year old essentially runner, I think will be where we should be moving.
MCCARTHY: Is this ultimately a failure of law enforcement, a failure to properly identify and investigate the chains of these transactions?
VICKERS: Well, Hong Kong is a free port obviously. The real failure must lie on the mainland. I mean it's the money that is exiting through inappropriate channels. Hong Kong is a free city, it's the freest city in the world, it's the best city probably to base a business - taxation is low, regulation is low, it's efficient, there is a strong rule of law. When I just think as it relates to targeting triads and organised crime and the proceeds of such, prosecuting the lower end, prosecuting the runners is really, who received fairly savage jail sentences, ten years or nine years, fairly significant, for what are obviously very, very low end persons in a much larger money system.