Money launderer to cops: 'We're not here to help you fight crime'

Yvonne Tahana is investigating money laundering in New Zealand. Here she delves into the case of a woman who taunted authorities as they closed in on her illegal operation.

It's rare that police get an email that is so catch-me-if-you-can in tone.

I ask Detective Inspector Lloyd Schmid if the two paragraphs that he's just read out from a small police-issue laptop are a bit, well, crazy?

"It certainly is," he said smiling.

More on that soon.

Schmid's our most experienced financial crime guy. He's got the bearing of a grammar boys school principal – think Graham Henry, the former All Blacks coach.

Before our interview he asks for questions. Every journalist knows this part of the job can be painful, I try to avoid it because for me it can make an interview stilted as people rely on prepared answers.

I am a bit humbled though, because his reply is thoughtful and open.

In person, he's not one to give much away, not someone you want to annoy. He's in Auckland from a regional base to talk through some of the country's most significant money laundering cases. They're all driven by the super-profits to be made and cleaned from meth, cocaine, and marijuana.

Because Kiwis pay some of the highest retail prices for drugs – all dollars at the gate – police estimate the pool of cash generated from narcotics is about $1.35 billion a year.

It means all the big drug investigations are also focused on where the money is going and how it’s being washed. And crucially, the professionals who are doing it for them.

But back to that email.

It came from a notorious money launderer, Cathay Hua, a Newmarket businesswoman who on the face of it ran a foreign exchange business. Under pressure from both the police and the Department of Internal Affairs to explain mounting irregularities, this was her unanticipated response.

"We are not in business to give the New Zealand government help fighting crime," she wrote. "It is your job to prevent crime and from criminals making money that they may try to launder through our business.

"If a criminal tries to launder funds through us, it's only because the police failed to stop them doing the crime."

Spoiler alert: Officers did catch Hua. She has the distinction of being handed a record seven-and-a-half-year jail sentence in 2023 – the longest ever for money laundering offences. Nearly all of it was linked to a single notorious meth importer who she laundered $27.5 million for.

But when Schmid – a 40-year veteran – originally saw that email his reaction was one of disbelief.

"I suspect she's going to regret sending that," he thought.

We've all done it, but it feels like a mini reminder never to hit send when your emotions are running hot.

We’re getting access to this level of detail because we're interviewing police about an exclusive report that sets out how criminals have used our banks to launder money.

Our story sets out the techniques criminals, known as "smurfs" and "mules", use to place money in our banks – and what those institutions are doing to fight it.

Schmid ran all of the big investigations the banks have assessed.

It'll come as little surprise that Auckland is the centre of the country's illicit money laundering activity given the city is a major part of our narcotics industry.

One Auckland branch was pretty popular as a point of placement for criminals, he said, and there's also a central supermarket carpark which has been a busy handoff point for cash. But Ponsonby Rd, under the Harbour Bridge, Half Moon Bay, a commercial carpark on the North Shore, and Newmarket have all featured as places to do business by different money launderers.

So who are these criminals? They have links to China, they present a business front, they run companies or shell companies where their legitimate financial or business services can be tied up with dirty money. Unpicking the legitimate business activities from the criminal acts can be painful, requiring forensic experts.

Detective Superintendent Greg Williams is a bigwig in charge of National Organised Crime. He's as gregarious as Schmid is contained – the type of interviewee where there's no real need to ask questions because he's such a good talker.

He's a leader who has a command of his subject matter, which is the impact of Transnational Organised Crime – otherwise known as TNOC – in New Zealand.

He is enthusiastic, just don't call him "passionate". With only a few years to go before retirement, he prefers "driven". He wants to get things done.

During research he sent me a story about a powerful Chinese money launderer working on behalf of Mexican cartels who, as ProPublica put it, "married market forces: drug lords wanting to get rid of dollars and a Chinese elite desperate to acquire dollars. The new model blew away the competition".

I’ll be delving deeper into this Chinese connection later in the week.

Williams can tell you everything about meth here and has a drugs policing history going back decades. He's clear that it’s the cash that matters now too.

So, he tells me with a bit of a grin, despite only ever doing one high school accounting class – a single class – he's got himself across the broader global methods of money laundering and the underlying economics of the problem, as well as what's happening on the ground here.

A couple of years ago, he said, police were worried about lawyers and accountants. Now the environment has changed and it is "unregulated remitters working within the Chinese community" that are moving money.

"One of the key things is nailing the professional facilitators that sit there providing that service to organised crime, both in New Zealand and externally to launder their money in whatever way they can."

Sometimes foreign criminals have flown in to place money in our banks, Williams said.

In 2018, police intercepted a 46kg cocaine importation at the Port of Tauranga as part of an operation codenamed Heracles. At that time it was the largest they'd seen for cocaine, given our drug of choice is meth.

"They had a Serbian guy doing all that part for them. The lead guys were Western Australian Rebels. They had a Croatian guy doing the money laundering," he explained.

"So we intercepted comms and watched the handover of money between a Vietnamese woman who came into the country.

"You know she's saying, like, 'I normally do Melbourne and Sydney but I'm here doing it, but if I'm not here, use my 2IC, who operates in Auckland for me’.

"We actually watched the handover of $600,000 in cash to her. And within an hour she's in a bank in Auckland depositing $100,000 into that account."

Williams is pretty firm that police are making a difference.

They're responsible for getting banks all in a room and working on the issue – that's a "good news story" for everybody, he reckons. Then there's the 2023 change under our Anti-Money Laundering and Countering of Financing of Terrorism Act, which stops anyone buying high-value goods with just cash – that threshold is set at $10,000.

Its aim is to put downward pressure on dirty cash getting into our system.

But there are frustrations for some of our highly skilled investigators, who face a high threshold to prove money laundering in the first place – the first hurdle being "what is the linked criminal offence that is generating the money? Is it a connection to drugs?"

Officers like Schmid have to be careful of case management because the investigations tend to bloom as police make ongoing connections between criminals.

After that intensive and painstaking work, police get to the pointy end of the process – court. Watching sentences handed down can be difficult.

Schmid walks me through a number of recent home detention and community work sentences.

"What I can say is we are actively working with government and [the] Justice [ministry] in an effort to amend the sentencing tariffs for money laundering," he said.

"We are certainly trying to get the sentencing tariffs amended to reflect the gravity of the offending."

That seems like a natural end to our interview, but it's not the last thing that he reveals.

He plays down footage from a police raid not seen before that reveals that despite all the efforts to hide money, criminals can be sloppy.

Cathay Hua had a hidden room that police found at her St Heliers bolthole. It was in what looked like a spare room, racks of clothing hanging in an open wardrobe. But one of the sections was on tracks and rolled backwards.

More on this topic

The closing-time trick used by 'smurfs' to launder money in NZ’s banks

Money laundering amounts to well over a billion dollars a year, but some of the techniques used are basic, new research reveals.

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July 6, 2024

1:13

Officers were able to walk comfortably into the space and found a safe. Inside they found fine jewellery pieces but no cash – instead, piles of it were found lying around the house.

In the end it was a gingerbread house of a sorts for Hua. No trail of lollies and cakes but, just like the fairy tale villain, it was her ill-gotten gains littered throughout her home that became a trap – one of her own making.