Cash and luxury cars seized from Daniel Hu (pictured) during the Operation Martinez money laundering investigation in 2020. Photo / NZME
A pair of professional money launderers used false identities and a network of disposable “money mules” to make cash deposits of $123 million in just three years.
Drug dealers, cigarette smugglers and fraudsters were among the customers of Daniel Hu and Musabayoufu Fuati, who were running foreign exchange and money transfer businesses from an office in Queen St.
Both men walked from court to start sentences of less than 12 months on home detention.
Neither Hu nor Fuati were listed as directors or shareholders in the various entities, known as the Wanda Group, which maintained a facade of compliance with New Zealand’s anti-money laundering legislation.
But a covert police investigation in 2020 exposed them as the Wanda Group’s controlling figures who used multiple aliases and low-paid proxies to avoid detection by financial authorities.
Typically, it was Hu’s job to take cash from clients and arrange for funds to be transferred to offshore bank accounts nominated by the client.
At best, Hu was reckless about the true source of the funds. Surveillance during Operation Martinez showed the 48-year-old meeting furtively with criminals, often in carparks, where he was handed large sums of cash.
One exchange with an illegal cigarette dealer was for more than $500,000, according to footage captured by a hidden camera planted in Wanda Group’s cash counting room.
Fuati was then responsible for arranging for the unexplained cash to be deposited into the legitimate banking system, without raising suspicion.
Between January 2018 and November 2020, a network of a dozen “third party depositors” — often young or vulnerable individuals hired as money mules — deposited a total of $123,455,400 in cash into about 400 bank accounts.
They would be paid $100 for every $100,000 deposited.
Those accounts were often in the names of aliases — for example, Hu had passports in different names from China, Antigua and Barbuda, and Mexico — or in the names of other individuals who let the Wanda Group use them.
They would be paid $200 for every $100,000 deposited.
The Wanda Group would also get a cut: customers were charged a commission of 10 to 20 per cent of the funds sent overseas.
When Hu and Fuati were arrested in November 2020, police restrained $5 million worth of property in Auckland, eight luxury vehicles valued at nearly $1 million, $340,000 cash and nearly $1.5m in bank funds.
In March this year, Fuati pleaded guilty to structuring a transaction — an offence under New Zealand’s anti-money laundering laws and punishable by up to two years in prison.
Hu — also known as Jun Jin — pleaded guilty to the same offence. But he also admitted four charges of money laundering, carrying a maximum penalty of up to seven years in prison.
The money laundering convictions for Hu covered $200,000 of ill-gotten gains from the supply of meth, the $118,000 invoice fraud and more than $600,000 netted from the sale of illegal cigarettes.
The structuring charge for both men covered the $123 million of cash deposits made by their network of “money mules”.
Hu appeared in the Auckland District Court on Wednesday for sentencing before Judge John Bergseng.
Hu had been born into severe poverty in China, according to a cultural report written for the court, but was able to achieve academically and financially.
The report said Hu, who is now working as a food delivery driver, was naive at the time of the offending and didn’t observe the cultural and legislative differences between New Zealand and China.
He has recently spent three months volunteering for the Red Cross.
Judge Bergseng adopted a starting point of three years and six months in prison for the four money laundering charges, then increased the starting sentence by three months for the $123m structuring charge.
He discounted the sentence by 10 per cent for factors outlined in the cultural report, 10 per cent for previous good character and 5 per cent for remorse, a total discount of 50 per cent.
Judge Bergseng then reduced the sentence by another 4½ months because Hu had already spent three years on bail, as well as three weeks in custody after his arrest, which took the end sentence to 18 months’ imprisonment.
This converted to nine months of home detention because people are automatically eligible for parole after serving half their prison term, in the case of short sentences.
In August, Fuati was sentenced by the same judge to home detention for two months and 14 days, taking into account a 25 per cent discount for his guilty plea and a further 10 per cent reduction for previous good character.
Operation Martinez was one of the first investigations of its kind in New Zealand as part of a strategic shift by police to focus on professional money launderers.
An audit in 2012 by the Financial Action Taskforce (FATF), a global body that audits the anti-money laundering performance of member countries, had noted New Zealand had a poor rate of prosecuting money laundering.
At that time, investigations into financial affairs were more likely to support asset recovery cases, or focus on the crime generating the funds to be laundered — usually drug manufacture or supply.
As a result, there had been a lack of attention on identifying “high risk” money laundering targets such as lawyers and accountants, who help criminals hide their money through companies and trusts, or money remittance firms taking dirty cash and wiring funds overseas.
The FATF recommendations led police to establish a specialist Money Laundering Team with a deliberate focus on professional money launderers.
The so-called “third party” launderers are not involved in making money through criminal activity, most often drug dealing in New Zealand, but are engaged as contractors solely to disguise the origins of dirty cash or get it out of the country.
Instead of reconstructing the financial transactions through forensic accounting alone, the money laundering teams also use investigative techniques more commonly found in covert drug operations.
Intercepting private communications, hidden cameras, physical surveillance and even undercover agents — along with combing through spreadsheets of banking data — are among the tools needed to gather necessary evidence.
“When we’re investigating professional money launderers, one of the key things we have to prove is the predicate offending,” said Detective Inspector Lloyd Schmid, who oversees the money laundering team.
“What is the crime that is being used to generate the illegitimate income, which is being washed clean by our target? Proving that is one of our bigger hurdles, and it’s not as easy as it sounds.”
Schmid, who has spent decades investigating gangs and drug dealers, would not comment on the sentences imposed in Operation Martinez.
But he said the new focus on professional money launderers was crucial.
“Organised crime is all about money. It’s huge money,” Schmid said.
“And these high-end money launderers, while not directly involved in the original crime, are helping drug dealers, fraudsters — even cigarette smugglers — hide their profits overseas.”
Jared Savage is an award-winning journalist who covers crime and justice issues, with a particular interest in organised crime. He joined the Herald in 2006, and is the author of Gangland and Gangster’s Paradise.
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.
Polkinghorne was sentenced to 150 hours of community work for drug possession.