Money transfer company's blind eye could have allowed for financing of terrorism - DIA

Wednesday, 24 July 2019

Jin Yuan Finance was accused in the High Court at Auckland of failing to properly identify its clients and alert authorities to suspicious transactions (file photo).

A money transfer company's disregard of legal requirements created a 'real avenue' for money laundering and the financing of terrorism to take place, a court has heard.

Jin Yuan Finance Limited is alleged to have hid bank accounts from authorities as it sent and received millions of dollars.

It allegedly did not fulfil its legal obligations to properly record who its clients were and where their money was coming from.

During a hearing at the High Court in Auckland on Tuesday, Justice Mark Woolford pointed to one of Jin Yuan's clients as an individual wanted by Chinese authorities on fraud charges.

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Another client, whose case has been reported in the media, appeared to be involved in a credit card skimming scam, the court heard.

The Department of Internal Affairs asked Justice Woolford to order Jin Yuan to pay a penalty of over $4 million.

The department's lawyer Katie Hogan said Jin Yuan Finance had repeatedly breached laws that aimed at stopping money laundering and financing terrorism.

It had failed to monitor its own accounts, continued business relationships with people without properly identifying who they were, failed to report suspicious transactions and failed to keep its own records over four years.

Hogan said while the company had not knowingly engaged in money laundering, it had effectively turned a blind eye.

'The extent of flouting the regime invites the inference of willful blindness and recklessness.'

Jin Yuan had eight outlets across Auckland and one in Hamilton.

It employed 19 workers, 10 of whom were 'volunteers' and didn't have work permits.

During a four-year period, the company repeatedly told department investigators that it was doing its business through one company bank account, the court heard.

During that time, there were 55,097 transactions through its account with a total of $278.5 million worth of business.

Other accounts associated with the company had been shut down by the mainstream banks who were complying with their obligations under the anti-money laundering legislation.

However, it later emerged that the company was using 17 bank accounts. Many of those other accounts were in the names of businesses and people not associated with the company.

The company only made admissions about the secret accounts when directly confronted by investigators for the department, the court heard.

Hogan said the department had been unable to determine just how much money was being funnelled through the company but it would be 'significantly greater'.

She said the department did not allege Jin Yuan was involved in money laundering or the financing of terrorism.

'But [Jin Yuan's] non-compliance with the [legislation] created a real avenue for money laundering or the financing of terrorism to have occurred in New Zealand.

An investigator for the department told the court in a sworn affidavit that reports found a large number of 'suspicious transactions'.

It showed 'substantial cash deposits' by people, including the company's shareholder and former company director, Rex Young.

The company was repeatedly warned by the department of its obligations to report suspicious transactions, including a formal published warning online.

The department also initially tried to educate the company's staff about what they had to do.

Despite that, Hogan said Jin Yuan continued in its failure to comply with the law.

Eventually it did begin to flag some suspicious transactions but only several months after the transaction had taken place and not within three days, as required by the law.

The department's investigator said the late notification 'would enable the relevant customer time to prepare documentation validating the transaction.'

Jin Yuan ceased trading in February 2018 and didn't oppose a trade injunction brought by the department two months later.

Jin Yuan has admitted breaches, but not the particulars of the allegations. It was not represented by a lawyer at the hearing.

Justice Woolford has reserved his decision.

A similar case, involving a company called Ping An, saw the Court fine the company $5.29 million.