Auckland finance director sentenced for laundering dirty multi-national drug money

A banned Auckland finance director has been sentenced after laundering dirty money for a high-profile multi-national drug deal.

The former Queen St broker is now also bankrupt after a High Court judge fined him $5.3m for his "calculated and contemptuous disregard" for anti-money-laundering laws in connection with more than 1500 transactions totalling $105.4m.

Xiaolan Xiao's offending was revealed following a Department of Internal Affairs (DIA) investigation which began in 2015 and uncovered millions of dollars in off-shore deposits which were never reported to authorities.

He then concocted a bogus explanation, telling investigators his records had been destroyed due to a computer virus and physical records removed by a cleaner.

Yesterday, the 61-year-old was sentenced to six months' community detention and 200 hours of community work by Judge Evangelos Thomas in the Auckland District Court.

The Herald revealed the Ping An Finance director had pleaded guilty to and been convicted of a money-laundering charge in May.

Xiao laundered half a million dollars. Police say his offending attempted to conceal a major drug trade in New Zealand through his financial consultancy business.

In explanation, Xiao, a New Zealand citizen born in Beijing, said about $50,000 in cash was left in his office for him, which he transferred into a Chinese bank account.

The money was to be transferred into renminbi (yuan) currency to help another person avoid paying tax.

The person and multi-national drug group cannot be identified by the Herald due to court suppression orders.

Xiao's lawyer Adam Holland said his client was reckless rather than having any direct knowledge of the source of the cash.

However, Judge Thomas said even if Xiao didn't know where the money had come from he "would be well aware it was dirty money".

Xiao accepted he maintained "incredibly sloppy business practice", Holland said, adding the businessman's wife had processed the transaction with Xiao's authority.

The High Court fine, Holland said, had rendered Xiao bankrupt and he has lost his ability to work in the financial sector, ending a 20-year career.

"There is an extremely high level of personal embarrassment given this has gone to the media and infiltrated his community," Holland said.

The Crown argued the loss of Xiao's ability to work in the financial sector fulfilled the public interest of the prosecution.

Judge Thomas agreed, adding Xiao had rightly already paid a heavy price for his offending.

"An enormous amount of trust is placed on people like you who work in our financial sector," he said.

"An economy that allows money laundering is a vulnerable economy. There is enormous national and public interest in ensuring all aspects of money laundering are shut down."

The judge said Xiao, who has no previous convictions, was genuinely remorseful and because Xiao would never work in finance again, he posed little risk of reoffending.

In a precedent setting High Court ruling, Xiao was earlier banned from offering financial services and Ping An slapped with its $5.3m fine.

Companies Office records show Xiao is the director and sole shareholder of Ping An, which operated out of a Queen St office.

Justice Kit Toogood had said the penalties, including Xiao's ban, were intended to be "so significant as to deter and denounce non-compliance".

He said the company "failed abysmally" to meet the rigorous reporting and monitoring requirements for 1588 transactions totalling $105.4m.

Of the transactions, 173 were ruled by the judge to be suspicious and required reporting under the Anti Money-Laundering and Countering Financing of Terrorism Act (AML/CFT).

The judgment was the first of its kind under the AML/CFT laws.

The pattern of wilful ignorance showed a "calculated and contemptuous disregard" for the law and was "a cultural norm" in the company, the High Court judge said.

Xiao was also described by the judge as having "misled the Department [of Internal Affairs] in the course of its investigation and demonstrated a complete disregard for the Act's requirements, if not a wilful intention to flout them".

In mid-2015 DIA approached Xiao with concerns over his record-keeping.

The businessman said Ping An's bank accounts had been closed and the transaction details could not be located.

A few weeks later he would claim multiple misfortunes meant all his records were destroyed.

"Office staff had reformatted the computer due to viruses and the cleaner had cleaned out all physical records," he told DIA investigators.

Bank accounts of Xiao's employees were also used to accept offshore deposits of $13.8m, and to make $16.3m in on-payments.

However, despite Ping An not reporting the transactions as suspicious - as it was required to do under law - the banks holding the accounts did.

Justice Toogood concluded Xiao was directly involved in the suspicious activities, leading to an inference the consultant may well have been a willing party to several instances of money laundering.

Xiao's agreed to cease operations after DIA began commenced its investigation.

The assurances, however, were undercut by ongoing bank account activity and applications for new employees' visas.

"Ping An's conduct has risked damaging the integrity of New Zealand's AML/CT system by assisting transactions to occur anonymously, depriving the [DIA] of its ability to monitor and detect activity of possible concern, and denying the [police] access to information related to suspicious transactions," Justice Toogood said.

Xiao challenged the $5.3m fine in court but lost earlier this year.

The police's Financial Intelligence Unit estimates $1.35 billion of criminal proceeds is generated for money laundering in New Zealand every year.

However, the actual transactional value is thought to be several times higher. (via NZ Herald)