Police FIU highlights potential money laundering by 'Category 1' foreign national investors & by individuals booking losses through share trades

Police FIU highlights potential money laundering by 'Category 1' foreign national investors & by individuals booking losses through share trades

The NZ Police Financial Intelligence Unit (FIU) has highlighted two money laundering red flags raised by banks in its latest Quarterly Typology Report.

The FIU says these money laundering methods and techniques were identified after Police analysed suspicious transaction reports. It says the methods described below fall into the “layering” stage of money laundering, where the aim is to create a complex series of financial transactions to disguise the source and/or ownership of the funds. The FIU says these matters are still under investigation. 

In the first example the FIU says it has received several reports from NZ banks about a potential movement of layered funds by two foreign nationals who live here as Category 1 investors, whereby a foreign national can apply for NZ residence if they can invest a minimum of NZ$10 million in NZ for at least three years. 

"It has been reported that in 2012, on the same day but separately, both investors had opened accounts to set up portfolios of New Zealand Immigration acceptable investments for a three year period in order to secure NZ residency. Shortly thereafter, investor 1 had funds of NZ$10.5 million arrive into his newly opened account, originating from several international transfers. Less than two years later after the initial investment, NZ$10 million was remitted to his own account held in his home country," the FIU says.

"Meanwhile, investor 2 had about half of the required amount of NZ$10 million arrive into his Immigration NZ bond portfolio account, which 18 months later was moved out to a NZ corporate bank account and then subsequently transferred out further to another NZ bank account the following day. When questioned, investor 2 was unwilling to provide details about the large account withdrawal, and soon after he closed his portfolio account."

 "The banks were unable to determine the purpose of the international transfers, there are serious questions and concerns that both individuals have breached New Zealand immigration rules and potentially laundered illicit funds through New Zealand," the FIU says.

In the second case the FIU says several NZ banks have reported unusual share trading patterns.

"Certain individuals would deposit cash of tens of thousands of NZ dollars into their newly opened accounts, and immediately start buying various high value stocks and selling them off in a few days, always for a loss. The banks became suspicious when they repeatedly tried to explain (to) the customers that their sale trade would result in losses but the clients had expressed no concerns about the large loss and continued with the pattern," the FIU says.

"One customer had small deposits of NZ$1000 coming into his account every couple of days. The source of the incoming funds was unknown as they were either cash or wire transfers. His trading pattern was not in line with common trading activity. For example, he would buy a number of shares relating to one company and within a month sell the same number of shares in that same company at an excessive loss." 

Although no evidence of market manipulation has been proved at this stage, the FIU says banks have red-flagged these transactions as a potential money laundering tactic.

*Parliament's passing of the Organised Crime and Anti-corruption Legislation Bill yesterday means banks must now report all international wire transfers over $1,000, and all physical cash transactions of $10,000 or more, to the Police FIU.

*This article was first published in our email for paying subscribers early on Wednesday morning. See here for more details and how to subscribe.

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7 Comments

All aboard the South Pacific Money Laundering Express, leaving Platform 1 for La la land in 5 minutes. Give me your tired, your poor, your huddled masses yearning to breathe free.... but category 1 investors, please go direct to your first class carriage. No questions asked sir. Nudge, nudge, wink, wink. $10 million sir. That'll do nicely sir. Whoaaaar.

You mean "all aboard John Key's Sth Pacific Money Laundering Express........" don't you"
With his background he knows exactly whats going on during his watch and has virtually enshrined it as the normal course of events.
I would suggest the Police FIU might be looking at some funding issues in the short term and some possible career moves back to the front line.
Kiwis so dumb lah - churn it all thru AKL.

...on a more basic level..buy a rental, leave vacant - cash deposits each week coded as rent from non existing tenant... or open shop selling nothing much....excellent weekly cash sales.

sell at a lose so as too not attract IRD?
these are only the tip. because china is cracking down on money laundering in macau revenues for the casinos have dropped 30%.
how much of this money was funneled into Auckland property with our lax regulations.?
how much did our government know about it?

Poor Aucklanders have been competing in a property racket, Keys Government dragged their heels across the floor and continue to do so on the affordable housing.

Yes, interesting how this has happened on John Keys watch and how Kiwis have largely stood by and let them do it.

"You get the government you deserve", unfortunately, we will all pay for this dishonesty.

Wrong. We won't all pay. Just some of us suckers who still live here and pay tax, and maybe have bank deposits.