'Precedent setting' court ruling sees director banned from business.

A test case for anti money-laundering regulations has seen a Queen St forex broker slapped with a $5.3 million fine and its director banned from business after a High Court judge found "serious systemic deficiencies".

The Department of Internal Affairs filed action against Ping An Finance and its sole director and shareholder Xiaolan Xiao, alleging noncompliance with the Anti Money-Laundering and Countering Financing of Terrorism Act, at the High Court at Auckland.

The action was uncontested and yesterday Justice Kit Toogood ruled the company's actions had resulted in "widespread contraventions across several key areas which were not isolate or infrequent".


The Act requires businesses - largely casinos and banks, but soon to cover lawyers and real estate agents - to identify and carry out due diligence on customers, monitor transactions, keep records and report suspicious transactions.

The Department of Internal Affairs successfully argued Ping An had failed to perform any of these tasks.

Marteen Quivooy, the general manager of regulatory services at Internal Affairs, welcomed the ruling as "precedent-setting".

"People need to take compliance with AML/CFT seriously. It's a high level of penalty, and it signals the seriousness of the issue," he said.

Internal Affairs said the business transacted $105.4m during the period in question - largely 2014 - across 1588 transactions, 173 of which Justice Toogood ruled could be classed as suspicious and requiring reporting.

"Overall, the 173 transactions presented to the Court by the Department contained several indicia of suspicious transactions, including unnecessary use of several transactions to pay or receive funds from a single customer on a single day or within a short period; the presence of very large transactions; and significant high value cash deposits," Toogood said.

"Nevertheless, Ping An failed to submit a single suspicious transaction report in respect of any of the 1588 transactions it conducted during the relevant period. It is not difficult to infer that the company's non-compliance amounted to a calculated and contemptuous disregard for the AML/CFT requirements, and that non-compliance was a cultural norm within the business."

Xiao was described in the judgment as a New Zealand citizen born in Beijing and Toogood said he "misled the Department in the course of its investigation and demonstrated a complete disregard for the Act's requirements, if not a wilful intention to flout them."


Ping An operated from an office on Queen St, with four staff, including Xiao, and relied on word-of-mouth to attract new customers. Its clients were said to be "principally Chinese migrants and students".

Approached by DIA in mid-2015 with concerns over record-keeping, Xiao first said the company's bank accounts had been closed, so transaction details could not be located. A few weeks later he claimed multiple misfortunes had seen all his records destroyed.

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

The court also heard Xiao used the bank accounts of his employees to accept offshore deposits of $13.8m, and also to make $16.3m in on-payments. While Ping An did not report these transactions as suspicious, the banks holding the accounts did.

Justice Toogood said: "Xiao and [a former shareholder] were directly involved in the activities giving rise to suspicion, leading to an inference that they may well have been parties to wilful money laundering."

After Internal Affairs began investigating in mid-2015, Xiao pledged to cease operations.

"Xiao advised the Department on at least six occasions that Ping An would cease financial activities and said it had done so by 1 April 2015."

These assurances were undercut by ongoing bank account activity, applying for visas for new employees and payments to Inland Revenue that led Toogood to agree with Internal Affairs that he should be banned by court order from carrying on trading.

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