A finance firm that failed to report $53.4 million of suspicious transactions from an international businessman accused of running a pyramid scheme has been fined $2.55m.
Last year's trial of Jiaxin Finance, its sole director Qiang Fu and Fu's mother Fuqin Che was the first case of its kind in New Zealand's courts since specific anti-money laundering laws were introduced a decade ago.
The Auckland-based company, Fu and Che were found guilty of failing to keep adequate records for and report 311 suspicious transactions. They also failed to conduct customer due diligence.
That customer was international businessman and mogul Xiao Hua Gong.
Che was further found guilty of structuring a transaction to avoid Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT) requirements.
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Today, at a three-fold sentencing in the High Court at Auckland, Crown prosecutor Sam McMullan described the offending as "insidious".
It was quite different to other cases, in that they were largely compliant but in relation to one customer making the offending difficult to detect, McMullan said.
It was all a part of the scheme to ensure the money was transferred anonymously without being alerted to the authorities, he said.
Gong, also known as Edward Gong, is an entrepreneur known for building a business empire in Toronto.
He was friendly with Canada's Prime Minister Justin Trudeau - having donated to the governing Liberal Party - and attended Trudeau's controversial "cash-for-access fundraising dinners".
But Gong was arrested in Canada in December 2017 over an alleged pyramid scheme involving the alleged fraudulent sale of hundreds of millions of dollars in shares in China.
The mogul has denied his financial success and influence was gained from an alleged $202m scheme selling medicines in China.
Nine months before that arrest, however, the New Zealand Police froze nearly $70m of his assets here as part of a global investigation.
Police alleged Gong was hiding money here to distance himself from the alleged scheme.
Today, the High Court at Auckland heard the Crown had obtained documentation from the Ministry of Public Security in China that stated Fu had four previous relevant convictions.
McMullan submitted they were "evidence of prior misconduct".
However, Fu's defence lawyer David Jones QC disputed this saying there was an inadequacy of proof of any conviction in China.
"The material provided by any organ of the Chinese justice system cannot be seen as reliable that a person has committed any offence."
The Crown says there is a piece of paper and you do not need to look behind that, he said.
"That simply cannot be right."
Jones, also representing the company, argued against the fine proposed by the Crown for the company was one that would "crush the company completely".
In fact, there would be few companies "that could sustain such a hit".
He said it was a compliant company with "one aberration in the form of Mr Gong".
Che's defence lawyer Kathryn Maxwell emphasised this was not a money laundering case and there had been no suggestion Gong was involved in anything untoward.
The court heard Che had met Gong in 2011 and trusted him.
Maxwell said her client was impressed by Gong and admired his achievements.
"The defendants appear to honestly believe that what they were doing was lawful."
A conviction was a penalty for someone who has had led a blameless life until the age of 65, she said.
Justice Tracey Walker said any fine imposed must ensure they did not profit from the offending while also deterring and punishing the offenders.
"It is obvious the defendants were motivated by profit-making."
Justice Walker concluded Jiaxin Finance was a family enterprise in which the duo had acted in concert and fined the company $2.55m.
"In short effective deterrence demands individual responsibility," she said before making the individual fines.
Before fining Fu, Justice Walker set aside the idea of any prior convictions as the standard of proof had fallen "well short" of what was expected.
However, she was not prepared to apply a discount for good character and ultimately fined him $180,000.
Che, who the court heard had suffered a "fall from grace", was fined $202,000.