Customs returns nearly $302,000 to foreign diplomat who failed to declare the cash in breach of money laundering laws

Customs New Zealand train dogs like Zara to detect drugs and cash at the New Zealand border. Photo / Nick Reed

EXCLUSIVE: Customs hands back nearly $302,000 to member of foreign delegation but details of the case remain secret as Chief Ombudsman rules disclosure would harm New Zealand's relationship with another country.

The head of Customs has handed back $302,000 seized from a mysterious foreign diplomat after he failed to declare the vast sum of cash in his luggage.

The experienced traveller, part of an official delegation invited to New Zealand, was let off with a warning instead of being prosecuted when a sniffer dog found the cash in his luggage on arrival at the airport.

The money was confiscated. Anyone arriving in the country with $10,000 or more must declare the cash under anti-money laundering laws. Anyone failing to do so could face three months in prison.

The Opposition says the case highlights a double standard.

"This is a very large amount of money. If you or I failed to declare a sum of money like this, we'd be out of pocket. Customs needs to explain what happened here," said Gerry Brownlee, National's spokesman for foreign affairs.

In response, Customs Minister Jenny Salesa said she was satisfied Customs had acted appropriately and "without pressure or influence".

The case is also shrouded in secrecy.

Officials refuse to reveal the identity of the individual, the country they were representing, the airport, or even the date of the cash seizure, to protect the Government's international relations.

But emails released under the Official Information Act show the confiscation led to crisis talks within the Ministry of Foreign Affairs & Trade (MFAT), where a "taskforce" was set up to handle the potential diplomatic fallout.

There were also one-on-one talks between the heads of Customs and MFAT, in which Christine Stevenson, the chief executive of Customs, vowed to act "without fear or favour".

MFAT officials noted among themselves Stevenson had "discretion" over whether the money was eventually returned.

This week, Customs confirmed nearly all of the $302,404.72 was returned following a review of the cash seizure.

The man had to pay $500 to get the balance back.

Passengers who fail to declare cash of $10,000 or more are breaching anti-money laundering law. Photo / Richard Robinson

"The Acting Comptroller of Customs was satisfied that the seizure of the money was lawful and, after taking into account all the circumstances, made the decision to grant conditional relief from the seizure," a spokeswoman said.

She said Customs' decision to return the money was because of a combination of factors including:

• The failure to declare the cash was a mistake the individual intended to correct.

• When questioned by Customs, the man voluntarily tabled $295,000 of the money.

• Nothing to indicate money laundering or financing of terrorism

• The individual was willing for Police to investigate the source of the money.

• The loss of the entire sum of money was considered disproportionate for an unintentional mistake.

"Each application is treated on its individual merits and carefully considered, and granting relief is not uncommon," said the spokeswoman, who said she could not provide figures on cases until Monday.

MFAT had "no involvement" in the review of the seizure process and the diplomatic status of the individual played no part in Customs' decision to return the money, the spokeswoman said.

But the diplomatic ripples of confiscating cash from a foreign diplomat would have played a part in Customs returning nearly $302,000, said money laundering expert Dr Ron Pol.

"That is certainly something Customs would have been aware of when exercising its discretion. I'm sure MFAT would have taken great care to be seen to be not trying to influence the decision," said Pol.

"But they didn't need to. Customs knew who this person is."

Brownlee criticised the decision and said Customs should not make any allowances for anyone with diplomatic connections if they did not invoke their immunity.

"Customs is right out of order here. It doesn't matter if the money was legitimate, it's the failure to declare which is the problem.

"And if someone fails to declare duty on something as small as a mail order, Customs is very strict. Fail to declare duty and it's gone. And you don't get it back."

Officials from MFAT and Customs refused to reveal the identity of the individual, the country they were representing, the airport, or even the date of the cash seizure, to protect the Government's international relationship with the country.

The Herald on Sunday appealed to the Chief Ombudsman Peter Boshier who upheld the decision.

The judge said he was "constrained in the amount of detail" he could give to explain his ruling.

"I assure you, however, that careful consideration has been given to the particular context and relationship; exactly how release of the information in this case would result in prejudice to New Zealand's international relations; and the factors which contribute to that prejudice being likely to occur."

A spokesman for Winston Peters said the Minister of Foreign Affairs and Trade was unaware his officials had withheld information about the cash seizure.

"The Minister was not provided any advice by the Ministry on why it was taking that approach. Nor did he instruct them to do so," said the spokesman.

"However, his view is that if the Ombudsman has ruled in favour then that demonstrates the Ministry followed proper process, applied the correct criteria, and therefore he agrees they took the right approach."

At the time of the cash seizure, Customs' senior lawyer alerted MFAT, which in turn set up a "virtual taskforce" to handle any "bilateral implications" which might arise with the foreign government involved.

Emails show MFAT officials researched whether the diplomat faced the same cash reporting obligations in his home country, which were similar to New Zealand.

One email from circulated around the taskforce repeated the gist of a conversation between Brook Barrington, the chief executive of MFAT at the time, and his counterpart at Customs, Christine Stevenson.

It noted the Customs chief executive had an "element of discretion".

"MFAT is very happy to engage if Customs would find it useful to discuss possible avenues in the exercise of [Customs] discretion."

Other documents released show the cash was discovered by a sniffer dog at a New Zealand airport.

The money, which was in several different foreign currencies, in his luggage converted to the equivalent of slightly more than $302,000.

The man, who was part of an official delegation from another country invited by the Government, spoke English and did not satisfactorily explain why he failed to declare the cash.

"He only said 'sorry, sorry it was my mistake'. He could not give me any reasonable excuse for his non-declaration," according to the Customs official who questioned the delegate.

"The money was located from various banks and currency exchanges around the world. [Redacted] explained that he travels a lot and collects cash as he goes. He could not provide any receipts to prove the source of the funds."

The man had a diplomatic passport - although used another passport to enter New Zealand - but did not invoke diplomatic immunity.

Instead of arresting him, Customs issued an official warning because of the "circumstances" and confiscated the cash.

"[REDACTED] wanted to know when he could uplift the cash on Monday morning, I advised that Customs would be detaining the cash and that he would not be getting it back on Monday," according to the report of a Customs official, released under the Official Information Act.

Undeclared cash is considered a "prohibited good" under the Customs and Excise Act, which can be detained and then permanently seized.

Simply bringing a large amount of cash into the country was not necessarily criminal, said Dr Ron Pol.

But failing to declare the money was a "strict liability" offence, where Customs does not need to prove intent - only the passenger did not declare the cash.

As such, Pol said the decision by Customs to issue a warning, rather than prosecute, "seemed odd" given the passenger was unlikely to forget $302,000 when filling out the arrival card.

"That's a box you have to tick on the arrival card. That's a large sum of money, it would take up quite a bit of room in your luggage," said Dr Pol.

"It's not like forgetting to declare a jar of honey, like I have before, or some fruit and you get an instant $400 fine."