$5.3m penalty for Queen St money shop

A money bureau on Auckland’s Queen St has been hit with a $5.3 million penalty for multiple breaches of the Anti-Money Laundering Act in the first such case to hit the courts.

In a judgment issued this afternoon, the High Court ruled that Ping An and its sole director and shareholder, Xiaolan Xiao, “failed abysmally” to identify its customers in relation to 1588 transactions totalling $105 million.

Although 173 of those transactions had particularly suspicious features, Ping An did not submit a single suspicious transaction report.

The Anti-Money Laundering and Countering Financing of Terrorism Act came into force in June 2013 and requires financial services businesses to verify the identity of their customers, keep full transaction and identity records and report suspicious transactions.

An investigation by the Department of Internal Affairs into Ping An’s business, involving money remittance and foreign currency services, found that between January 2014 and January 2015 it failed to meet its statutory obligations under the act.

Mr Xiao is a New Zealand citizen born in Beijing, China. He incorporated Ping An in March 2009.

The court ordered Ping An to pay pecuniary penalties totalling $5.3 million and granted injunctions restraining Ping An and Mr Xiao from carrying out activities as a financial institution.

The individual penalties were as follows:

Failing to conduct customer due diligence - $1.495 million

Failing to monitor accounts and transactions - $575,000

Having a business relationship with a person who does not provide satisfactory evidence of identity - $575,000

Failing to keep records - $1.15 million

Failing to report suspicious transactions - $1.495 million

In his ruling, Justice Christopher Toogood said Mr Xiao “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. Moreover, his misleading behaviour during the course of the Department’s investigation indicates a strong probability that if he is not restrained from engaging in financial activities, Mr Xiao will continue to ignore obligations under the Act to which any other entity in which he is involved, in any capacity, may be subject.”

The DIA filed its civil proceedings against Ping An in September last year alongside a similar case against Auckland money remitter Qian Duo Duo (trading as Lidong Foreign Exchange).

The DIA said today it was unable to comment on the case against Qian Duo Duo because it was still before the courts.

The allegations against Qian Duo Duo were that it had failed to meet its legal obligations for customer due diligence, account monitoring and record keeping. The DIA also alleged the company failed to establish, implement and maintain an effective AML/CFT programme.