An Auckland-based money remitter has been penalised $4 million for failure to comply with recently introduced anti-money laundering laws.

Justice Mark Woolford decided Jin Yuan Finance should pay $4 million following a lawsuit from the Department of Internal Affairs. The penalty compares with $5.29 million awarded against Ping An Finance and $356,000 against Qian DuoDuo, which were both also accused of not complying with the AML regime.

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The case brought by the Department of Internal Affairs is the third in the AML/Counter Financing of Terrorism space and the litigation is the second to involve consulting company Starfish Consulting.

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According to Justice Woolford's judgment dated October 3, Jin Yuan, which had eight outlets in Auckland and one in Hamilton, had already ceased trading last year.

The DIA accused Jin Yuan of failing to conduct due diligence, monitor accounts and transactions, and comply with the requirement to report suspicious transactions.

It also entered into and continued business relationships with customers who didn't produce or provide satisfactory evidence of their identities.

The judgment says the DIA had already inspected Jin Yuan and provided feedback to it ahead of the new legislation. The money remitter then engaged Starfish which helped it provide a programme which the DIA said was mostly compliant. The consulting company was heavily criticised by Qian DuoDuo in its case, where the judge gave a much smaller penalty after finding the company had relied heavily on Starfish for advice, reducing its culpability.

However, it then got another consultant, AML Solutions, to review it, and that company assessed Jin Yuan as non-compliant.

In 2015 the DIA inspected Jin Yuan onsite and found breaches in several areas. It also noted its staff list recorded 10 of 19 staff members as "volunteers" and that those volunteers didn't have clearance from Immigration New Zealand to work. The DIA later found Jin Yuan's compliance officer didn't have permission to work in New Zealand.

In April last year, restraining orders were made against the company, which is solely owned and directed by Yuan Yuan, as well as a former director and shareholder, Rex Young.

The Jin Yuan case then went to an undefended hearing and the company was found liable.

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According to the judgment, the DIA was unable to work out the total value of non-compliant transactions by Jin Yuan because of its complex network of bank accounts. However, it had declared 55,097 transactions with a value of $278.5 million to the supervising authority.

"An inference is available that Jin Yuan was deliberately concealing its use of non-disclosed bank accounts as a number of its bank accounts had been closed by the major banks on the basis of risk under the act," the judgment says.

Justice Woolford decided Jin Yuan's behaviour was misleading and that it did not cooperate with the act. The penalty would have been $4.7 million had the judge not discounted for the fact that it admitted the act and did not oppose restraining orders.

- BusinessDesk