A banned director of a finance firm has now been convicted of money laundering, just weeks after losing a legal battle challenging a $5.3 million fine for his "calculated and contemptuous disregard" for anti-money-laundering laws.
The Herald can reveal Xiaolan Xiao, 60, the Ping An Finance director and sole shareholder, has pleaded guilty to and been convicted of a money-laundering charge.
He appeared in the Auckland District Court on May 10 before Judge Evangelos Thomas to accept his offending.
The charge against him stated he had been reckless in respect to $500,000, as to whether or not that cash was the proceeds of a crime.
The money that Xiao, a former Queen St broker, laundered allegedly helped conceal drug trading in New Zealand.
In explanation, Xiao said about $50,000 in cash was left in his office for him which he transferred into a Chinese bank account - into Renminibi - to help another person avoid paying tax.
That person can not be identified by the Herald due to suppression orders.
Xiao, a New Zealand citizen born in Beijing, will be sentenced later this year.
Companies Office records show Xiao as the director and sole shareholder of the company and that he lives in a plush central Auckland apartment.
Last year in a precedent setting High Court ruling, Xiao was banned from offering financial services and Ping An hit with a $5.3 million fine.
Justice Kit Toogood said the company, which operated out of its Queen St office with Xiao, "failed abysmally" to meet the rigorous reporting and monitoring requirements for 1588 transactions totalling $105.4m.
Of the transactions, 173 were ruled by Justice Toogood to be suspicious and required reporting under the Anti Money-Laundering and Countering Financing of Terrorism Act (AML/CFT).
Justice Kit Toogood ruled the company's actions had resulted in "widespread contraventions across several key areas which were not isolate or infrequent".
He said the pattern of "calculated and contemptuous disregard" for the law was "a cultural norm" in the company.
Xiao was also described by Justice Toogood as having "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".
Approached by Internal Affairs in mid-2015 with concerns over record-keeping, Xiao first said the company's bank accounts had been closed and the 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.
Xiao also used the bank accounts of his employees to accept offshore deposits of $13.8m, and to make $16.3m in on-payments. Despite Ping An not reporting the transactions as suspicious, the banks holding the accounts did.
Justice Toogood said Xiao was directly involved in the activities giving rise to suspicion, leading to an inference that he may well have been party to wilful money laundering.
Xiao had also agreed to cease such operations after the DIA began investigating.
The assurances, however, were undercut by ongoing bank account activity, applying for visas for new employees and payments to the Inland Revenue.
It was this that led Justice Toogood to ban Xiao from trading and offering financial services.
"Ping An's conduct has risked damaging the integrity of New Zealand's AML/CT system by assisting transactions to occur anonymously, depriving the [DIA] of its ability to monitor and detect activity of possible concern, and denying the [police] access to information related to suspicious transactions," the judge said.
Earlier this year, Xiao also lost his challenge against the $5.3m fine and applied at the March 2 hearing for Justice Toogood's judgment to be set aside, claiming a miscarriage of justice.
Justice Toogood had said the penalties, including Xiao's ban, were intended to be "so significant as to deter and denounce non-compliance".
The judgment was the first of its kind under the AML/CFT laws.
Further requirements under the laws are set to come into play from July 1.
An estimated $1.35 billion of criminal proceeds is generated for money laundering in New Zealand every year but the actual transactional value is thought to be several times higher, according to the police's Financial Intelligence Unit.