Major banks linked to money laundering

by | Apr 20, 2010 | Business

POLICE and corporate regulators have raided homes and businesses to smash a crime syndicate that launders money through the stockmarket after getting inside tip-offs from leading investment banks.

The crime ring, whose network extends from New South Wales to Western Australia, uses young people with little means to extract cash from ATMs after successful share trades executed through Commonwealth Bank’s online broker, CommSec.

Police raided the homes of two Deutsche Bank employees on April 9 searching for email and phone records and documents in connection with the WA syndicate. They were searching for trades in brewer Lion Nathan before an $8 billion takeover bid by Japanese brewer Kirin.

Shares in Lion Nathan jumped from $8 to more than $11 in late April last year when the deal was announced, delivering a stellar profit to those who had bought shares before the announcement. Among those who profited are people with links to organised crime in WA.

Deutsche Bank is not suspected of any wrongdoing and is co-operating with authorities in the investigation. The bank was, on the same day as the raids, issued with a notice to produce information by the Australian Securities and Investments Commission, with which it complied. The bank did not comment on the matter last night.

In late May last year, ASIC was alerted to suspicious trading in Caltex shares. Caltex’s share price rose from $11 to $12 on news that it intended to buy Mobil’s petrol stations.

Another leading investment bank has been the subject of preliminary ASIC inquiries over the Caltex trading but has not been issued with a notice to produce. One of its employees is alleged to have provided information to the syndicate about Caltex before the announcement.

The Caltex deal was later blocked on competition grounds but a taskforce from ASIC homed in on one $500,000-plus trade in which parties linked to the crime syndicate had benefited.

Sources said the syndicate members relied on young people to remit the cash by withdrawing $1000 amounts – the daily limit – from ATMs.

This was a method, said the source, of laundering money from illegal activities.

Spokespeople for CommSec and Deutsche Bank declined to comment about the investigation.

The trading in Lion and Caltex shares is one part of a wide-ranging investigation into insider trading in which several companies and individuals have been issued with notices to produce information. The crime syndicate is believed to have garnered trading tips from several sources and traded in a range of shares on the stock exchange.

The share trading has been conducted through what are thought to be fake company names along with fake names of individuals behind them.

Insider trading is notoriously hard to prove because stock tips are mostly provided by word of mouth and there is rarely a paper trail or recorded conversation to produce in evidence.


Michael West

Michael West

Michael West established to focus on journalism of high public interest, particularly the rising power of corporations over democracy. Formerly a journalist and editor at Fairfax newspapers and a columnist at News Corp, West was appointed Adjunct Associate Professor at the University of Sydney’s School of Social and Political Sciences. You can follow Michael on Twitter @MichaelWestBiz.

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