Was Ye Hua the victim of her trusting nature or complicit as the “money lady” for drug cartel kingpin Xavier Valent? George Block reports.
Tucked away in the back streets of Newmarket behind a movie theatre, Lidong Foreign Exchange looked like just another Auckland money remitter.
But the Crown claims it was the funnel through which millions of dollars of dirty money was laundered from the streets to the overseas accounts of expatriate Kiwi drug lord Xavier Valent.
Lidong director Ye (Cathay) Hua is on trial in the Auckland District Court facing 19 money laundering charges covering almost $30 million, most of which was allegedly at the behest of Valent.
She pleaded not guilty to all charges.
Her lawyer David Jones KC said she ran a legitimate business that often dealt in large quantities of cash. Criminals took advantage of her trusting nature, he said.
Crown prosecutor Sam McMullan said there were simply too many red flags for Hua not to have realised the masses of cash were of an illicit origin.
Those red flags included the physical state of the money. Notes were sometimes wet or sticky with white powder, requiring her to literally clean the money before it was allegedly laundered overseas, the jury heard.
Her trial comes hot on the heels of the successful prosecution of Auckland man Xavier Valent.
The 34-year-old received a rare life sentence for drug offending this month after a jury found him guilty of dozens of charges following a marathon trial earlier this year.
They covered the importation, distribution or supply of methamphetamine, meth precursor ephedrine, cocaine and MDMA.
They stemmed from his time overseas as head of a sprawling syndicate he commanded that smuggled drugs into New Zealand and for several years distributed them in Auckland and further afield in industrial quantities.
He was arrested at the Italian border on an Interpol warrant in 2020 and extradited back to Auckland to face trial.
The jury in Hua’s case is hearing about some of the same cast of drug runners that appeared in Valent’s trial.
They include references to Valent himself as well as another man, allegedly a key operative in the syndicate, who has name suppression as he is set to appear as a Crown witness later in her trial.
Her charges solely cover money laundering and there is no suggestion she was herself involved in the importation of drugs.
Hua, 58, cut an unlikely figure when she stood in the dock at the start of the trial on Monday. Her $4m home in Springcombe Rd St Heliers, overlooking the water at what Bayleys once described as “one of the most incredible locations in Auckland,” was raided by the Armed Offenders Squad early in 2021 and seized by police.
Wearing a floral dress, she smiled and appeared relaxed as a registrar read the particulars of each charge and she said not guilty 19 times, watched by several supporters in the public gallery.
Later in the day, when Jones was making his opening remarks, she broke down in tears.
McMullan, in his opening address, said Hua laundered just under $30 million by converting cash and electronic funds into bitcoin and foreign currency by way of overseas transfers.
Of that, $27.6 million was for Valent, the Crown claims. One of the charges Hua faces says that between July and October 2018, she laundered $4,746,690 cash for Valent across 19 deposits.
“The important part of money laundering, for this trial, is it only becomes money laundering if the person knows the money received was the proceeds of crime, or was reckless as to whether it was the proceeds of crime,” McMullan said.
He said he expected the key issue in the trial was whether Hua knew the money she was converting was the proceeds of crime.
McMullan said the Crown’s case is that if Hua didn’t know the masses of cash were ill-gotten gains, then she knew there was a risk.
“There were just far too many red flags,” he said.
She did not ask Valent or others for identification as required by anti-money laundering legislation, the Crown claims. McMullan said she repeatedly asked if it was drug money, received “pretty hopeless responses,” and carried on.
Once she received a bag of drugs among the cash, and still she carried on, McMullan said.
On other occasions she received notes that were sticky, wet or were covered in a powdery residue, the prosecutor alleged.
Police gathered masses of evidence in their inquiry into the activities of Hua and others, dubbed Operation Ida, via a listening device covertly planted in Lidong, intercepted telephone calls and messages on encrypted apps, the jury heard.
Those messages show Hua telling Valent she had washed the money and was counting it, and expressing concern it was drug money. In one of those messages, taken from seized phone belonging to one of Valent’s former minions, Hua is described as “money lady Newmarket”.
But McMullan acknowledged a key issue in the trial was at what point Hua allegedly formed the knowledge that the cash must have been from a dubious source.
“Was it at charge one, or at some other stage.”
Jones, in his opening statement, said that while Valent’s crimes were now well known, that was not the case when he was employing Hua’s services several years ago.
Several of the charges show Hua was conversing with a figure who went by the usernames Commodity Trading, Pacific Trading and Universal Trading, now known to be Valent aliases.
“One thing you must avoid at all costs is looking at things with hindsight,” Jones cautioned the jury.
“How many times have all of us said ‘what was I thinking?’
“You know what you were thinking. This is all good, this is fine.
“Hindsight is deadly to a fair trial. Hindsight kills fair trial rights of a person … absolutely destroys presumption of innocence.”
Jones said Hua’s defence was quite straightforward.
She ran a legitimate business dealing in large volumes of cash - the amount covered by the charges is less than 10 per cent of Lidong’s total turnover - and had people contact her whom she thought were legitimate.
“Ms Hua is a trusting individual,” Jones said.
On Tuesday, the Crown called Rob Milnes, Principal Advisor of the Anti-Money Laundering (AML) Group at the Department of Internal Affairs.
He said Lidong operated an informal system of money remittance outside formal banking channels like the financial messaging system SWIFT.
This is dubbed the “hawala” system after the Arabic term for transfer or wire, and is a trust-based system involving no actual transfer of funds. Instead, a money remitter to China for example will hold an account in a Chinese bank and use that to pay out the remittance.
“Typically those funds held in China are incoming funds from an unrelated customer who is transacting at the same time as the outbound money remittance customer. There’s a balancing out of the two amounts,” he said.
Under cross-examination from McMullan, Milnes said the system was attractive to money launderers because it did not have the same paper trail as SWIFT.
Milnes said money remitters were required under anti money laundering legislation to verify the origin of a client’s funds.
“From a reliable and independent source,” he said.
“So essentially, not taking the customer’s word … but actually seeking independent documentation to establish where the money came from.”
Milnes also revealed to the jury that Internal Affairs had taken a successful civil proceeding under anti money laundering legislation against Lidong about six years ago for failing to accurately record its relationship with several other money remitters, among other breaches.
Lindong was ordered to pay $356,000 for the breaches in 2018.
When Jones cross-examined Milnes the lawyer had fun with the fact the Internal Affairs man was appearing via audio-visual link from Rome, where he was on holiday and the time was past midnight.
“Should we ask where you get your money from to be able to go to Rome? It’s a facetious question.”
Under questioning from Jones in the small hours on the other side of the world, Milnes agreed Hawala was based on trust.
“If you want some Euros so you can go down to the Colosseum, but you haven’t got any …I can let you have money out of my Italian account? Is that how it works?” Jones said.
At the end of his cross-examination, Jones honed in on another agency Internal Affairs monitors under anti money laundering legislation: Auckland’s Sky City casino.
“Is it fair to say the casino receives vast sums of cash on a daily basis?”
“Yes,” Milnes replied.
“Has the casino ever been prosecuted for money laundering?”
“No.”
The trial continues on Monday.
George Block is an Auckland-based reporter with a focus on police, the courts, prisons and defence. He joined the Herald in 2022 and has previously worked at Stuff in Auckland and the Otago Daily Times in Dunedin.