Money mystery: Secrecy over $300,000 seized from member of a foreign delegation invited to New Zealand

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

EXCLUSIVE: An anonymous tip in the mail prompted Official Information Act requests which confirmed a member of a foreign delegation failed to declare a large sum of cash, in breach of New Zealand's money laundering laws. Jared Savage reports the cash was confiscated but no arrest made, a decision which one expert said "seemed odd".

More than $300,000 has been 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 case is 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.

Even the name of the detection dog is redacted to protect the canine's privacy.

Now, the international official is trying to retrieve his money from Customs, which seized the undeclared cash as a "prohibited good".

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 acting chief executive of Customs, vowed to act "without fear or favour".

While MFAT officials were at pains to not be seen as influencing Customs, they noted among themselves Stevenson had "discretion" in whether the money was eventually returned.

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

Under anti-money laundering law in New Zealand, travellers entering or leaving the country must declare cash of $10,000 or more, or foreign currency to an equal value.

Customs said 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.

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

"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."

Failing to declare cash of $10,000 or more is a breach of the Anti-Money Laundering and Countering Financing of Terrorism Act, which carries a maximum penalty of three months in prison.

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.

If the cash is confiscated, an individual can appeal to Customs to prove the money was legitimate.

Customs confirmed to the Herald that the individual had now sought the return of the $302,000.

Any passengers entering or leaving New Zealand must declare cash of $10,000 or more. Photo / NZ Herald.

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.

"In terms of process, [REDACTED] has been in touch with Customs to find out a) what the process is from here; and b) how they propose to act," wrote Ben King, MFAT deputy secretary for the Americas and Asia.

"In doing this, [REDACTED] was very clear that MFAT was gathering information to understand whether a diplomatic response might be necessary; we were not attempting to influence the process in any way."

Neither Customs or MFAT will reveal the identity of the individual, the country they were representing, or even the date of the cash seizure, as to "not prejudice the international relations of the Government of New Zealand".

The Herald has referred the response of the two government agencies to the Office of the Ombudsmen for review.

A second email from Ben King to members of his 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.

There was a two-step process, wrote King.

First, Customs would seize the $302,000 without fear or favour.

The second step, noted King, provided the Customs' boss with an "element of discretion".

"The process allows the individual from which the funds have been seized to prove the money was legally obtained (ie nothing to do with money laundering). As noted, the Comptroller does have some discretion at this point. Stevenson alerted Barrington that her decision would take account of [REDACTED] with Customs officials [at the airport on arrival]," wrote King.

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

Dr Ron Pol, an expert in money laundering in New Zealand, said simply bringing a large amount of cash into the country was not necessarily criminal.

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."