The federal government has released key proposals aiming to further strengthen regulation of Australia's remittance business as it hinted the introduction of tougher measures on money forwarders who could be utilised by launderers and human smugglers.

In an AAP report, Home Affairs Minister Brendan O'Connor said that dealers are susceptible to misuse and abuse as he stressed that a stronger regulatory regime will check and deregister remittance dealers who launder funds and help criminals on their nefarious activities.

He said that federal authorities are ensuring that this important service, which is being used to send money to family and friends, will not be taken advantage for criminal purposes, adding that cash transfer services can be utilised to compensate organisers of people smuggling activities.

Mr O'Connor pointed to the popular hawala dealers, which informally transfer international funds, and said that the government is looking to develop a fair and workable registration system with the sector, in hopes that the conduit system could still provide cheap and effective services while minimising if not totally eradicating misuse.

As obtained by AAP, a recent report by the Australian Institute of Criminology said that evidence of misuse pervades the remittance system in Australia and abroad, adding that offenders have been found operating for a substantial time and amounts of money.

The report pointed to seeming collusion in Australia by legitimate and illegitimate remittance dealers in handling suspicious transactions if only to secure for a higher rate of commission, as the institute added that such dealings were more likely marred by criminal activities such as drug trafficking, tax and custom evasion and even financing of terrorism.

Still, the report has failed to access solid information that would connect established illegal activities to existing remittance businesses, as the institute has emphasised that "there is currently no clear evidence of the level of misconduct associated with alternative remittance."

Though calling attention on the possibility of the remittance sector to be entwined in illegal dealings, the report said that "on the basis of the current research and consultations, it is apparent that most remittance transactions are legitimate."