Understand the concept
Under section 5 of the AML/CTF Act, money laundering means conduct that amounts to an offence under Division 400 of the Criminal Code or a corresponding state, territory or foreign offence. It can involve money or property derived from crime or used in crime. Hiding its origin or ownership is common, but an unusual payment alone does not establish an offence. A transaction can look ordinary while serving an unlawful purpose. Conversely, complexity alone does not prove laundering. The risk assessment should consider how the service could be used to handle money or property connected with crime. It does not decide whether a customer committed an offence or reproduce every element of the criminal law.
- Observed facts
The payment comes from an unexplained party, or records do not support the stated source.
- Assessment
Check the explanation and evidence. An inconsistency alone does not prove a criminal offence.
Keep the observation separate from the conclusion
Illustrative distinction based on the business purchase example. Do not fill evidence gaps with an assumed criminal explanation.
Separate evidence questions. An answer to one does not settle the others.
Look at the relationship between facts
An illustrative review connects the customer, the service, the money and the explanation. Ask what the transaction achieves and whether the available records support that purpose. Keep the analysis specific. A vague label such as suspicious company does not show what the reviewer observed. A mismatch between the stated activity and supporting records is more useful to investigate. The proposed method keeps observations separate from assumptions and makes it possible to change the assessment when reliable new information becomes available.
Worked example: a business purchase
Imagine a buyer describes the funds for a business purchase as trading profits. The financial statements show little trading activity, while the payment arrives from a company with no explained connection. None of those facts alone proves an offence. In the example review, the business asks for an explanation through its approved process and compares the answer with reliable records. It documents what is supported and what remains inconsistent. It then follows its escalation process instead of inventing a criminal explanation to fill the gaps.
Avoid a rigid three-stage checklist
For learning purposes, people often discuss placement, layering and integration. A practical review should not require evidence of a neat sequence before taking a concern seriously. The example business focuses on the activity it can observe and the service it provides. It does not claim to see the full movement of funds across the economy. This is a useful limit on the analysis: explain the evidence available to the business, identify uncertainty and avoid treating an incomplete picture as proof that no risk exists.
Connect the concept to controls
The next useful question is how the business could be misused through its actual services. An example team discussion can identify the information available at intake, payment and completion. It can then assign review steps to those points. Keep the discussion linked to real activities rather than a list of dramatic crimes. Follow the sourced risk and reporting guidance when setting controls. The examples do not replace a business risk assessment or establish that a control is sufficient.