$5.3m penalty for Queen St money shop

A money bureau on Auckland’s Queen St has been hit with a $5.3 million penalty for multiple breaches of the Anti-Money Laundering Act in the first such case to hit the courts.

In a judgment issued this afternoon, the High Court ruled that Ping An and its sole director and shareholder, Xiaolan Xiao, “failed abysmally” to identify its customers in relation to 1588 transactions totalling $105 million.

Although 173 of those transactions had particularly suspicious features, Ping An did not submit a single suspicious transaction report.

The Anti-Money Laundering and Countering Financing of Terrorism Act came into force in June 2013 and requires financial services businesses to verify the identity of their customers, keep full transaction and identity records and report suspicious transactions.

An investigation by the Department of Internal Affairs into Ping An’s business, involving money remittance and foreign currency services, found that between January 2014 and January 2015 it failed to meet its statutory obligations under the act.

Mr Xiao is a New Zealand citizen born in Beijing, China. He incorporated Ping An in March 2009.

The court ordered Ping An to pay pecuniary penalties totalling $5.3 million and granted injunctions restraining Ping An and Mr Xiao from carrying out activities as a financial institution.

The individual penalties were as follows:

Failing to conduct customer due diligence - $1.495 million

Failing to monitor accounts and transactions - $575,000

Having a business relationship with a person who does not provide satisfactory evidence of identity - $575,000

Failing to keep records - $1.15 million

Failing to report suspicious transactions - $1.495 million

In his ruling, Justice Christopher Toogood said Mr Xiao “demonstrated a complete disregard for the Act’s requirements, if not a wilful intention to flout them.

“His failures as a director and manager of the business led directly to the scale and severity of Ping An’s breaches. Moreover, his misleading behaviour during the course of the Department’s investigation indicates a strong probability that if he is not restrained from engaging in financial activities, Mr Xiao will continue to ignore obligations under the Act to which any other entity in which he is involved, in any capacity, may be subject.”

The DIA filed its civil proceedings against Ping An in September last year alongside a similar case against Auckland money remitter Qian Duo Duo (trading as Lidong Foreign Exchange).

The DIA said today it was unable to comment on the case against Qian Duo Duo because it was still before the courts.

The allegations against Qian Duo Duo were that it had failed to meet its legal obligations for customer due diligence, account monitoring and record keeping. The DIA also alleged the company failed to establish, implement and maintain an effective AML/CFT programme.


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So.
No signs of actual criminal behavior. Just a failure to comply with pointless bureaucracy.

Well done to the Department of Internal Affairs. Top effort.

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The article notes that 173 transactions had suspicious features, but none were reported to the NZ Police for investigation.

There may have been criminal activity, but it could not be detected as Ping An was ignoring the law.

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I don't think that's a helpful comment at all.certain countries citizens consistently ignore nzs laws probably because they think we are stupid which could be correct because we let them buy our assets.my view is that this sort of blatant transgression should have been accompanied with a deportation order.

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The judgement makes it clear that the only hint of criminal activity was that there were some large transactions.

The government is demanding to know about all transactions you make, even though there is no grounds for them to suspect you of wrong doing.

The financial intermediary is compelled to act as an agent of the state and report on its customers even when there is no cause to suspect these customers of committing a crime and if they don't they can get clobbered with a fine large enough to put them out of business.

And no one gives a damn.

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Sorry Damien... I fail to see your point. Its the law. Reporting large transactions ... financial intermediaries know this is the law.

They have wilfully ignored the law which is specifically designed to insure large transactions are subject to a higher degree of scrutiny.

You cannot pick and choose which laws you wish to follow.

The fine seems large... but the blatant ignorance of their responsibilities seems obscene and I suspect that's why the fine is as it is.

I would also think questions should be asked as to how directors carried out the responsibilities... or were they just about clipping the ticket... would not want any of these names appearing on any other boards.

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You can and should pick and choose laws to obey.

Laws and morality are not synonymous.

The state has the power to review all of our financial transactions but should they have this power?

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Actually I give a damn as it impacts our business hugely.customers I have known for 20 years have to fill out stupid aml forms and the reason we have all this nonsense can be traced directly to 9/11 and dodgy characters trying to get their ill gotten gains out of places like China and Russia.so I have no sympathy for these fools.

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Those who trade liberty for security deserve (and get) neither.

Our AML is way over the top, and an unquantifiably huge drag on our economy. And it's not about catching suicide bombers out of Gore, it's about state control over every aspect of our lives. I'm as mad as hell about it. As we all should be.

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Also, Brent, China is a ruthless communist tyranny. We should be helping those Chinese who want their freedom get their money out for the same reason we should take refugees.

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Also, Brent, the same applies to the Russians under Putin's tyranny.

Also, Brent, if we, as a country, could model our economy off the cash economy, no tax, no byzantine, internecine permissions required from a suffocating bureaucracy, etc, etc, we'd all be better off.

[Disclaimer: have nothing to do with the cash economy, as the state, as in this case, will destroy you. The West is way closer to a gulag than a free society.]

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You know,one of the best things about nbr is the ability to comment on stories and exchange views with the author and readers.im sure it is one of the reasons the subscription model works for the paper.

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You rail against tyrannical regimes and how we should help these people "get out" to the West, then proceed to call our society a gulag.

Don't drink and comment, Mark!

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We now have governments that can, even outside of our ruthless tax regimes that operate above privacy law, look at every private transaction without any evidence of wrongdoing, and our own banks are warranted to spy on us. And governments wonder why Bitcoin and cryptocurrencies are becoming so popular.

Let me go through four years of all your bank transactions, and there will be very little I can't tell you about yourself and your private life.

The AML's are state abuse of power, pure and simple, and form part of a complex and suffocating mesh of tax and securities law that binds us all, and put our societies well on the way to a gulag, every bit the power China's communist government has, although, still, in their use of force, Chinese communism is marginally worse. Looking at Catalonia this morning, however, the gap is closing quickly.

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Yep. Don't anyone wonder why productivity growth has dropped off a cliff in the West: tax and securities legislation are now bigger than free markets - look at the OECD rules on information sharing - and NZ's iteration of money laundering law is a monster of state abuse. That law has made every business transaction, and the most important private transactions around property and banking, like walking through treacle. To complete anything now is a battle against bureaucrats. It's going to close us down more than even the RMA.

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This is not China mate

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Interesting that the charges were laid under this country's 'Countering of Financing of Terrorism Act'.......one can only speculate as to what the Court's sentence would have been in China?

Good night nurse.

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Bravo to NZ Enforcement regime. thumbs up!

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A scam just been revealed in Canada - intermediaries laundering drug money using Casinos and Whales, underpinning the property boom in Vancouver http://vancouversun.com/news/national/exclusive-how-b-c-casinos-are-used...

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The news story here is not Ping An.

It's that the DIA did what they, and the Reserve Banks have always said - and punished the bad-actor - not the bank - and that the banks are wrong tremble at the thought of doing their job here - which was to record and report all the cash transactions.

Without the banks - there would be zero evidence.

And banks should be celebrated for producing all this evidence - and punished for any other action that eliminates any avenue to gather evidence - or "taking blanket approaches to de-risking" - as the RBNZ calls it.

The DIA, and NZ, would have had no legs to stand on - if all this was cash. And all cash, is completely possible, and completely legal.

All parties need to have their roles recognised - and this is a great outcome. And the banks should be named, and thanked. It's what AML legislation was supposed to capture, and the way it was supposed to be captured.

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Won't get into the politico/societal aspects here but I have real concern at the technical level - why is DIA involved here having little or no banking, financial, forex, and related skills?

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