Police want harsher penalties for money laundering according to ministerial briefing

The sentence of home detention given to Daniel Hu after he admitted orchestrating $123 million in cash deposits to avoid anti-money laundering regulations was highlighted to Police Minister Mark Mitchell in a briefing. Photo / Police

Frustrated detectives want a law change to make it easier to investigate professional money launderers, as well as harsher penalties for those convicted of the crime, according to a briefing given to the Police Minister.

Money laundering is the process by which criminals disguise the original ownership and control of profits gained by their offending, by making such proceeds appear to come from a legitimate source.

They often engage the services of so-called “third party” launderers, who are not involved in the original crime that made the profits, but essentially act as contractors to clean the dirty money.

Targeting these professional launderers became a strategic priority for police in recent years after New Zealand was criticised by a global anti-money laundering body for a poor rate of prosecution.

Specialist money laundering teams were ring-fenced in 2018 and the investment by police led to a series of successful covert investigations.

Convictions were secured and millions of dollars of criminal assets seized, but a recent briefing to Police Minister Mark Mitchell has revealed that the police believe the investigations have exposed a number of “challenges” to investigating money laundering.

The first problem is that detectives are being asked not only to prove that money laundering has occurred, but also the predicate offending — the crime that generated the cash, most often drug dealing.

“This means Police Money Laundering Teams must divert focus to investigating predicate offending, which can be challenging and unnecessarily extends the length of investigations,” the briefing said.

“There are opportunities to make it clear in legislation that evidence of predicate offending is not required and that the circumstances of how the money is being dealt with can be sufficient to prove the offence.”

Currently, money laundering falls under two different laws; the Crimes Act and the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act.

Under the AML/CFT, where the police need to prove only that the suspect has handled the money in an illegal manner (such as the “structuring” of many cash deposits), the maximum penalty is two years in prison.

Under the Crimes Act, where the police also need to prove the predicate offending, the maximum penalty is seven years in prison.

This has led to circumstances such as Operation Martinez.

The principal target, Daniel Hu, used multiple false identities and a network of disposable “money mules” to make cash deposits of $123 million in just three years.

He pleaded guilty to “structuring” under the AML/CFT and four counts of criminal money laundering, which covered nearly $1m of ill-gotten gains from meth, fraud and black-market cigarettes.

Hu walked free from the Auckland District Court to serve nine months’ home detention, as first reported by the Weekend Herald and highlighted in the briefing to Mark Mitchell.

Several other professional money launderers such as those exposed in Operation Menelaus and Operation Brookings also received non-custodial sentences, while former radio broadcaster Nate Nauer also received home detention for laundering $420,000 for the Comancheros gang.

The longest money laundering sentence in New Zealand was the seven years and six months in prison handed to Ye “Cathay” Hua, who was convicted of 15 charges relating to $18m from a drug syndicate.

“New Zealand has also become out of step with other comparable jurisdictions in relation to the seriousness of money laundering as an offence,” the ministerial briefing said.

“A penalty of home detention recently imposed in New Zealand for a case involving $123 million is an example of the potential for stronger deterrence from engaging in such offending.”

The police told Mitchell that Australia now has a tiered approach to the sentencing of money launderers depending on the circumstances, which is similar to how New Zealand deals with methamphetamine offending.

The maximum penalty in Australia (for someone who knowingly launders more than $10m) is life imprisonment.

Police believe a move to a tiered penalty approach for money laundering, similar to Australia, should be considered,” the briefing said.

Professional money launderer Xiao Yu Lu had his Lamborghini car seized in Operation Brookings, but avoided a prison sentence. Composite Photo/NZ Police/NZME

A request to interview a senior officer about the briefing was declined by Police National Headquarters, who deferred to the office of the Police Minister.

In a written statement, Mitchell said he was focused on all areas of criminal offending but with a priority to violent offenders, gangs, and serious retail crime.

“Sitting alongside this, I am continuing to take advice from Police on how we continue to address proceeds of crime, money laundering, and disruption of cash and assets for gangs, and organised crime.”

While police declined to comment on the ministerial briefing, the head of the money laundering teams has previously told the Herald the focus on criminal cash was crucial in tackling organised crime.

“Organised crime is all about money. It’s huge money,” Detective Inspector Lloyd Schmid said last year.

“And these high-end money launderers, while not directly involved in the original crime, are helping drug dealers, fraudsters — even cigarette smugglers — hide their profits overseas.”

Jared Savage is an award-winning journalist who covers crime and justice issues, with a particular interest in organised crime. He joined the Herald in 2006, and is the author of Gangland and Gangster’s Paradise.