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Words by Cameron Cooper

As Australian accountants prepare for significant anti-money laundering reforms, a New Zealand criminal case involving a fraudulent pet food and garden store operator serves as a timely warning.

In 2022, Kane McNeill was sentenced to seven months’ home detention after admitting to supplying equipment to cultivate cannabis as part of money-laundering charges. New Zealand Police’s Financial Intelligence Unit manager Daniel Frost notes that the business had deposited more than NZ$17 million of cash into its bank account over a period of 10 years, including up to NZ$80,000 in cash a week, on some occasions.

“This is cash and they weren’t issuing any invoices or keeping records of the purchaser of their products, or what products they sold,” Frost says. “The business owners had been advising their accountant that the cash was for sales of hydroponics and pet food, and the accountant obviously took that at face value.”

The case drives home the need for customer due-diligence checks in the face of rising money-laundering incidents. “It’s a good example of why know-your-customer [measures] are so important in the accounting sector,” Frost says.

Tricks of the scammers’ trade

There are three steps fraudsters use to disguise the source of illegally earned money and make it usable:

1. Placement – money is introduced into the financial system, usually by breaking it into multiple deposits and investments.

2. Layering – the money is then moved around to create distance between the funds and the fraudsters.

3. Integration – the money is then brought back into the perpetrators’ fold as ‘clean’ money.

Here are some of the common methods criminals use to launder money.

Smurfing or structuring

Criminals break large sums of illicit money into smaller sums to avoid suspicion and detection. Banks must report deposits above a certain amount, so the ‘smurfs’ deposit small amounts separately to avoid financial institutions reporting suspicious transactions to authorities.

How to detect it: be alert to unusual transaction patterns, including frequent deposits just below reporting thresholds and discrepancies in financial records. Many financial institutions rely on AI-driven tools to monitor real-time transactions to identify these atypical patterns, but one red flag for accountants may be a client who makes multiple cash deposits on the same day across multiple branches and ATMs.

Round tripping

Funds take an unusually varied ‘trip’ through many accounts and shell companies to disguise their illegal origin, before being returned as apparently legitimate funds into valid accounts held by the perpetrator.

How to detect it: be wary of a client making repeat or ‘circular’ transactions with the same counterparty. Genuine business transactions typically involve a variety of counterparties. Unusually consistent revenue growth could also suggest there is reason for concern. While steady business growth is desirable, abnormally consistent revenue patterns may be an indication that accounts are being manipulated.

Shell companies

Existing only on paper, shell companies are used to hide ownership and facilitate fraudulent transactions through complex networks that are hard to trace. Illicit funds appear as payments for goods or services that do not exist.

How to detect it: if a client is using an abnormal number of accounts, particularly across different jurisdictions, it could be a sign of efforts to move funds through complex structures to conceal their origin or destination. In addition, clients who are unwilling to provide comprehensive know-your-customer details, such as ID documents or proof of address, should be treated with caution.

Reselling assets

Perpetrators purchase high-value items such as real estate, luxury goods or artwork with dirty money, then resell them and convert the proceeds into legitimate-looking assets or transactions.

How to detect it: you can potentially expose these schemes by scrutinising frequent transactions that do not have a clear economic rationale, or which have inconsistencies in buyer-seller identities. Sudden influxes of funds involving unconventional assets, such as art or cryptocurrencies, may point to attempts to launder money.

Trade-based laundering

This involves disguising the proceeds of crime by moving the funds within legitimate trade flows, by hiding the origin and integrating them into the global financial system.

How to detect it: look for inconsistencies in invoices, unusual shipping routes, mismatched trade documents and pricing anomalies. Over-invoicing or under-invoicing goods is a common trick, allowing criminals to manipulate the value of the goods in a trade deal to aid the movement of funds. For example, the fraudsters may overstate the value of imported goods to transfer excess funds into the country, or they may understate the value of exports to repatriate funds. A specific red flag could be high levels of trade with high-risk jurisdictions that are known for having weak anti-money laundering regimes.

Cyber laundering

Criminals use hard-to-trace digital currencies such as bitcoin and ethereum to anonymously launder large sums of money through the internet and the dark web. Online exchanges allow for quick transactions and low fees, making them attractive to criminals who use mixing services, or ‘tumblers’, to blend their illicit money with legal funds.

How to detect it: given the complexity of such transactions, accountants are urged to ramp up their know-your-customer policies and rigorously screen clients. If you are suspicious of client activity, you may have to collaborate with watchdog or law-enforcement bodies who have access to advanced forensic accounting and transaction-monitoring technology.

Frost says it is pretty apparent that cryptocurrencies are the “currency of choice” for criminal groups globally. “We’ve seen a lot more criminal activity and money being laundered through crypto and federal assets, and service providers, not just here in New Zealand but around the globe.”

Stopping the flow of dirty money

Australia and New Zealand are committed to AML/CTF (anti-money laundering and counter-terrorism financing) legislation designed to prevent illicit funds being received through criminal activities such as theft, tax evasion and the misuse of drugs.

With crucial amendments to take effect in Australia next year that mirror New Zealand’s initiatives, professionals such as accountants, lawyers, and trust and company service providers will be firmly in the front line of defence against money laundering.

Australian Transaction Reports and Analysis Centre (AUSTRAC) CEO Brendan Thomas says the government intelligence agency is advising accounting practitioners to start getting familiar with the legislation now, if they have not already done so.

“Money laundering is not only carried out by professional syndicates running complex and large-scale operations, it’s also occurring in small businesses, especially those that handle cash,” he says. “Professional service providers like lawyers and accountants can establish business structures and associated banking arrangements that help individuals launder funds and conceal wealth.”

He points to instances in which accountants have “become unwitting facilitators, or were simply reckless to the risk of money laundering.”

“Criminals want to conceal their proceeds of crime, evade tax, retain control over illicit funds and provide a veneer of legitimacy for their criminal activity,” Thomas says. “Accountants are uniquely positioned to observe and provide insights into suspicious behaviour, helping to build a more complete picture of money-laundering activities that allows AUSTRAC to generate intelligence and assist law-enforcement activities.”

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Money laundering act

Anti-money laundering and counter-terrorism financing legislation is being implemented in New Zealand and Australia in two phases.

Phase 1 is in effect in both countries and applies to banks, casinos and a range of financial services providers.

Phase 2 has been running in New Zealand since 2018 and comes into effect in Australia from 1 July 2026. This second phase brings the accounting profession, lawyers, trust advisers, real estate agents and others into the regime. Some business functions offered by these professions are thought to be particularly vulnerable to exploitation by organised criminals and terrorists.

In Australia, Tranche 2 entities, including accountants, can start enrolling with AUSTRAC from 31 March 2026.

“AUSTRAC understands that industry will need time and support to effectively implement the obligations,” says Brendan Thomas, CEO of AUSTRAC.

The joint regulatory and intelligence agency will release draft rules and guidance for consultation later this year.

“Your engagement with this process will help you develop familiarity with your new obligations and an AML/CTF program that will enable you to comply,” Thomas says.

AUSTRAC has established a new team to provide industry groups and associations, in both existing and newly regulated industries, with a direct engagement avenue. “This will simplify and improve support to industry associations to coordinate and drive effective implementation of the reforms,” Thomas says.

Under the AML/CTF changes, newly regulated entities will need to implement a range of obligations, including to:

• Enrol with AUSTRAC
• Develop an AML/CTF program
• Conduct customer due diligence
• Submit threshold transaction reports (TTRs) and suspicious matter reports (SMRs) to AUSTRAC.

AUSTRAC encourages people to look at relevant information on its website and to talk to industry associations for additional advice.

In New Zealand, New Zealand Police’s Financial Intelligence Unit provides information relating to suspicious transactions and activity, money laundering, the financing of terrorism and other serious offences.

Manager Daniel Frost says the takeaway lesson for accountants in New Zealand since Phase 2 started in 2018 is that “vigilance is really the key thing”.

“I see accountants, finance specialists and lawyers as kind of the keepers of our system.”

He calls on accountants to be especially alert for unusual transactions or “unexplained wealth” that is not consistent with a client’s financial profile.

“If they’ve got no justification for a significant amount of money, which is outside their normal customer profile for bank or financial transactions, that should be raising concerns that something is not right.”

Frost also advises accountants in Australia to be involved in the consulting process around new legislation and to engage with the regulator over “evidence-based reasons for change”.

“What I keep saying to our Australian partners who are involved in the consultation process is that you do have a say in how the legislation can be shaped.”