Auckland company Ping An fined $5.29 mln for 'calculated and contemptuous disregard' for anti-money laundering laws

Ping An, a Queen Street, Auckland-based money remitter and foreign currency service provider, has been fined $5.29 million for "serious and systemic deficiencies" in complying with anti-money laundering laws.

A High Court judgment in a case brought by the Department of Internal Affairs against Ping An Finance (Group) New Zealand Company Ltd and its director Xiaolan Xiao, is the first determination of financial penalties claimed under the Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT Act), which came into force in 2013.

The Department of Internal Affairs, one of New Zealand's three AML/CFT Act regulators, alleged that, between January 2014 and January 2015, Ping An and Xiao "failed abysmally” to comply with requirements of the AML/CFT Act with respect to 1,588 financial transactions involving a total of $105.4 million.

“In all, 173 transactions presented to the Court by the Department contained several indicia of suspicious transactions, including unnecessary use of several transactions to pay or receive funds from a single customer on a single day or within a short period; the presence of very large transactions; and significant high-value cash deposits. Nevertheless, Ping An failed to submit a single suspicious transaction report in respect of any of the 1588 transactions it conducted during the relevant period. It is not difficult to infer that the company’s non-compliance amounted to a calculated and contemptuous disregard for the AML/CFT requirements, and that non-compliance was a cultural norm within the business," Justice Kit Toogood said.

In addition to the fine, Justice Toogood granted injunctions restraining Ping An and Xiao, until further court order, from carrying out any financial activities that would cause either of them to be deemed to be a financial institution under the section 5 of the AML/CFT Act.

Examples of suspicious transactions cited in Justice Toogood's judgement include;

(a) On 19 May 2014, four transfers from ......................to Ping An, totaling $170,000;
(b) On 11 June 2014, a $50,000 cash deposit by Mr Xiao to a customer, ................... ;
(c) On 9 July 2014 a $200,000 transfer from a customer, ..................., ................... to Ping An, followed by a $600,000 transfer from the same person to Ping An on 10 July 2014;
(d) On 24 July 2014, a $444,444 wire transfer from Ping An to a customer, .............. ....., followed by three separate payments from Ping An to that customer on 28 July of $150,000, $250,000 and $300,000.

 The full judgment is here and below is a press release covering the key points.

MEDIA RELEASE
This summary is provided to assist in the understanding of the Court’s judgment. It does not comprise part of the reasons for that judgment. The full judgment with reasons is the only authoritative document. The full text of the judgment and reasons can be found at www.courtsofnz.govt.nz

Background

This High Court judgment is the first determination of pecuniary (financial) penalties claimed under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (the Act). The Act, which did not come fully into force until June 2013, creates onerous reporting and record keeping requirements for the financial sector in an effort to detect and deter money laundering and the financing of terrorism.

The case, involving transactions totaling over $100 million, arises from an investigation by the Department of Internal Affairs, which is responsible for enforcing the Act, into the activities of Ping An Finance (Group) New Zealand Company Limited (PA) and its sole director Mr Xiaolan Xiao.

Ping An is a New Zealand incorporated company that has carried on business providing money remittance and foreign currency services from offices above Auckland’s Queen Street. Mr Xiao is a New Zealand citizen born in Beijing, China. He is and has been the sole director of Ping An since its incorporation. He has also been the sole shareholder since 5 May 2015, prior to which he was a co-shareholder with various people, including a Ms Xu. During the investigation period, the company had three frontline employees and, according to Mr Xiao, was not a complex business, obtaining new customers by word-of-mouth.

The Department alleged that, between 1 January 2014 and 9 January 2015, PA and Mr Xiao, the second respondent, “failed abysmally” to comply with requirements of the Act with respect to 1,588 financial transactions involving a total of $105.4 million.

Specifically, the Department alleged PA failed to meet its statutory obligations to:

 carry out customer identity and verification of identity checks as part of customer due diligence;

 adequately monitor accounts and transactions;

 keep transaction, customer due diligence, and other records;

 report suspicious transactions in breach of relevant AML/CFT requirements in Part 2 of the Act.

The Department also alleged PA entered into or continued business relationships with persons who did not produce or provide satisfactory evidence of their identity.

Procedure

For the purposes of claims for pecuniary penalties under the Act, it is for the High Court to determine whether these allegations were proved on the balance of probabilities – the requisite standard in civil actions. In this case the respondents did not make any representations to the Court. If proved, the Act provides for a range of financial penalties and entitles the Court to issue injunctions.

Finding

The Court found the DIA’s case against Ping An to be proved. In a detailed judgment analysing each of the alleged breaches, Justice Toogood concluded there had been “serious, systemic deficiencies in complying with a multiplicity of obligations under the Act” resulting in “widespread contraventions across several key areas which were not isolated or infrequent.”
The Court described as an aggravating factor the fact that Mr Xiao, had 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.

“His failures as a director and manager of the business led directly to the scale and severity of Ping An’s breaches. Overall, Ping An failed to keep appropriate records for 1588 transactions totalling $105,413,026.44; the identity and verification of 362 customers; and the establishment and continuation of 122 business relationships.

“In all, 173 transactions presented to the Court by the Department contained several indicia of suspicious transactions, including unnecessary use of several transactions to pay or receive funds from a single customer on a single day or within a short period; the presence of very large transactions; and significant high-value cash deposits. Nevertheless, Ping An failed to submit a single suspicious transaction report in respect of any of the 1588 transactions it conducted during the relevant period. It is not difficult to infer that the company’s non-compliance amounted to a calculated and contemptuous disregard for the AML/CFT requirements, and that non-compliance was a cultural norm within the business.”

With respect to the company’s failure to report suspicious transactions despite the presence of external indicia that indicated they qualified as such, the Court noted that Mr Xiao and his then fellow shareholder Ms Xu were directly involved in the activities giving rise to suspicion.

Penalty

The Court found that the failure of Mr Xiao and his company to meet their obligations under the AML/CFT Act was at the higher end of non-compliance with the Act’s requirements.

It determined that any pecuniary penalty imposed under the Act must be so significant as to deter and denounce non-compliance; reflect the prescribed maximum penalty; and recognise Parliament’s intention that significantly greater penalties should be awarded than in cases under the predecessor legislation, the Financial Transactions Reporting Act 1996.

The Court made orders requiring Ping An to pay a total of $5.29 million in pecuniary penalties. It also granted injunctions restraining Ping An and Mr Xiao, until the further order of the Court, from carrying out any financial activities that would cause either of them to be deemed to be a financial institution as defined in s 5 of the Act.

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49 Comments

Ping An? Sound like a case of deliberately misleading nomenclature to me...
"Ping An Insurance is one of the top 50 companies in the Shanghai Stock Exchange"

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17

Good work. I trust our authorities will pass details of this couple, their 362 customers and 1588 transactions to the relevant Chinese authorities, as required in clause 11 of our Comprehensive Strategic Partnership:

'The two sides will continue to work ... with respect to joint efforts to combat cross-border crime, and to facilitate the recovery of the proceeds of crime within our respective legal frameworks.'

tip of the iceberg I imagine.

Correct, I am a Chinese. I report KVB Kunlun New Zealand Ltd. which laundried about 16 million nzd a week during the real estate peek time to authorities, No response.

Read sections 75 and on of the AML/CTF Act - you will find provision for civil and criminal actions - in this case the DIA has taken civil proceedings

Hmmmm.

Double Jeopardy would apply. The decision would have been made based on the threshold for a civil offense being lower than criminal. "Reasonable and Probable Grounds" rather than "Beyond Reasonable Doubt".

However if China wanted to commence criminal actions from their end that would not apply. If the transactions can be traced back to China, and that information given to Chinese authorities, then that might be more influential than anything done here.

That is concerning! There is clearly an intent to disregard the law and therefore the activity is criminal.

Absolutely a fine is nothing, well 5 mill nothing. But these guys need to to go to jail. I think jail is a bigger deterrant for CEOs, otherwise they will keep on doing it.

Good luck to whoever goes after the main Ping An CEO in China! The NZ subsidiary is small fry. Ping An China has 5 trillion in assets alone and I guarantee you all the chief execs will be well shielded from a cheeky bit of money laundering in NZ.

Do we care about going after people in China. Its the people in NZ we care about. Maybe CEO is wrong, its the people here in NZ whatever label they are.

I was unaware of the size of Ping. But this is an example, it should be a criminal offence.

If the activities had been a kiwi in Beijing they would have been in jail straight away on arrest and awaiting a closed trial behind closed doors

Business will simply close its doors and the debt will be added to all the others that never get paid

This is so serious that it reflects badly on the reputation of NZ.

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11

Ping An is the laundry

Ping An Finance (Group) New Zealand Company Limited is the conduit acting as the NZ based receiver or transmitter acting on behalf of the end originator

No mention of any of the launderers, who they are and where the money went, or came from
Or was it drug money leaving NZ

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11

Does NZ have any laws whereby individuals can lose their citizenship and be deported for such serious crimes. When given citizenship don't immigrants have to certify that they will conform to all NZ laws. Also what is happening with regard to his clients who were obviously laundering money?

It wasn't a crime according to the determination, it was a civil offense.

11 connected people frantically trying to sever connections
https://nz.linkedin.com/in/xiaolan-xiao-3aab6539

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16

Whatever it is key will be involved for sure

Well its about time someone was prosecuted ........ I hope the Crown hands down a custodial sentence when it gets to the point where there is a criminal prosecution

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14

One down, who knows how many to go. How about some deportations, huh?

Nothing about this in Stuff, and I checked both 'Business' and 'Crime'. No wonder people are oblivious.

Widely publicised? You're kidding - none of those links are to MSM. And the scoop one is just a reprint of the DIA media release - which MSM may or may not have picked up.

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16

A case of the slows

Took a while didn't it - told ya back in 2012

Next time you are in Auckland, take a wander up and down both sides of Queen Street and then along Customs Street and observe the number of Chinese hole-in-the-wall foreign-exchange money-movers. They weren't there 15 years ago. They sure as heck aren't changing NZ $20 notes into NZ $5 notes.

And also in suburbia

May 2012 http://www.interest.co.nz/news/59333/90-seconds-9-am-ecb-cuts-cash-some-...

Justice delayed is justice denied. In this case for the New Zealand public denied timely justice. I haven't had time yet to read the full decision, but was the company prevented from conducting business from the time the charges were laid?

We can only hope there are more companies in the system awaiting justice.

None - maybe one - Don't hold your breath - has a gentle smell of cover up - hope it goes away

The DIA news releases web-site has a list of exactly 3 "public" actions since 2013 - of those 2 were warnings and the 1 under discussion here
https://www.dia.govt.nz/diawebsite.nsf/wpg_URL/Services-Anti-Money-Laund...
It's down under "press releases" further research reveals it has issued 21 non-public warnings or in other words private warnings - yesterday I took a cruise through the AML/CFT Act and could not see where there were provisions making a distinction between public and private warnings
But there you are - wonder how many of those private warnings Ping An got

Over on Croaking Cassandra - the RBNZ guru - there is an article partly on the RBNZ
https://croakingcassandra.com/2017/09/28/a-first-unlawful-act/
where there was a brief flurry of comments about the responsibilities of the RBNZ under the AML/CFT Act where there has been no action yet by the RBNZ over AML activities - and the croaker more or less ducks and weaves and hand-balls the responsibility over to the police and yet if you read the Act most of the responsibilities are with the supervisors - I'm guessing it's only if they want a criminal prosecution then they refer it to the police - no evidence of that yet
Anyway read it
https://croakingcassandra.com/2017/09/28/a-first-unlawful-act/

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18

Just wait until Winston Peters is running the show. How much of the Auckland property market has been bought with illegal Chinese money launderers trying to wash there money clean through the real estate casino ??? He will place caveats over those properties so they cant be sold. Go Winston !!!

Winston will not be "running the show" ..lol.

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11

You never know.

Remember the winebox

A great read is Ian Wishart's "The Paradise Conspiracy". Dirty tricks by mostly the National Party, politicians with their fingers in the pie. Even some pretty dodgy work by the Police to leave the winebox original documents in the hands of offenders lawyers. Speaker of the house prevented the documents being tabled under paliamentary privilege, first time ever that had been done. Peter was ultimately proven right, but it happened well after the public and media had lost interest.

Not surprised.

The DIA filed its civil proceedings against Ping An in September 2016, 12 months ago, and we just hear about it now. There is a parallel case in the courts now against a Qian Duo Duo
https://www.nbr.co.nz/article/53m-penalty-queen-st-money-shop-th-208274

Qian Duo Duo
https://opencorporates.com/companies/nz/3267152

Was all publicised widely last year

Sept 2016
https://www.lawsociety.org.nz/news-and-communications/latest-news/news/r...
https://www.dia.govt.nz/press.nsf/d77da9b523f12931cc256ac5000d19b6/68542...
http://www.scoop.co.nz/stories/AK1609/S00253/internal-affairs-takes-acti...

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24

I wonder how much laundered money went to the National Party election campaign?

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11

how much went into the Auckland housing market,

lots

It should be a fine for billions not a few million. It means nothing to Ping An being one of the largest public HK/Chinese companies.

Was this the real Ping An or just a bunch of crooks using the name?

OMG apparently Ping An means 'Safe' in Chinese!! Your money is safe with Ping An LOL!! #PingPingAnAn #平安

A wonder this fraud was allowed to be made public, with the Govt (& now its Schools) gagging any public comment or news
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11927840

Thank god for this website. One of the few bastions of proper journalism left in this country.

If you invite all and sundry with funny munny, you cannot expect much else. Banks revel in it.

Follow the MUNNY.

The World forced interest rates dow-n, so funny money could rise up. Freely.

In someones debt, not mine...of necessity.

If you invite investments with little serious dosh, criminals will be there for the undertaking and printing it in spades.. QE some call it.

Some call it inflationary, some call it a free printing press, but the Press are not interested, in reporting ..That.......Little Truth..

If you have Leaders that turn a blind eye to those coming in with this new Laundry Money and deny and deny for ever and a day, it would take an honest journalist with a lot of stamina to get the point across to the electorate, that unfortunately for some, wants to repeat this, over and over again, as it is unbelievably uplifting, using leverage, for most poll-lies and their supporters who benefit, in more ways than one....Free dollars... average cost.....nowt.

Forced inflation, I call it.. QE by another name, Beg, Borrow and be forgiven. Amen...no real crime, ...say two Hail Mary's, ...and a get out of Jail Free card. Print and be damned....well actually..No.

Praise the Lord, here is your knighthood.

It is also called creating Capital out of thin air, as most bwankers would attest

(If honesty actually were the best policy...which it is NOT..)

But as Wellington is the home of the most corrupt House owners in this country "Leading by Example" taking advantage of this Capital inwards Flight, a Capital Idea,but played out in the New Inflation Capital...Awkland.

Where it started...in this country after being blessed in others. Like New York, and Washing-ton of Money State.

Where the Lords Prayer was answered. Trump won...America First...and Fore-most.

Now spreading to a suburb too close for comfort to you.

No Names, no pack drill....Just my "Honest" assessment. Inflated Ego, No knight-hood...and never want to live in a dis-honest hood....no matter,how it was pumped, pimped and PRIMED.

And that you can Bank on...Sub-Prime and all....Cash...what's that...Print and be Damned.

But then..I do not Frive a Fiat.

There should be a retrospective AML check on all property purchases in Auckland since 2010.

Twitterati tweeting

Foxes
How much has already been washed through our property market?
https://twitter.com/FoxyLustyGrover/status/913970661713788928

Bernard Hickey replies
No one knows. We've only just started paying attention
https://twitter.com/bernardchickey/status/913970940668551168

Mind numbing
Seven years of comment here and they've only just started paying attention?
Wonder if Hickey includes himself in that not paying attention - that would be damming

Paying attention to what? Ooooohhh there's a cat video!

Worth drawing parallels - here's how they roll in Vancouver;

http://www.zerohedge.com/news/2017-10-01/behind-vancouvers-housing-bubbl...

Reported in 2012. I remember it. Winston nails it again - now let's hope he's in the position to go in for the kill.