How a drug syndicate hid their cash
Sometimes laundering drugs money is complicated, sometimes it’s as easy as ASB, writes Benn Bathgate.
When a student named in court documents simply as ‘Ms Do’ walked into the ASB branch on Auckland’s Queen St and paid $100,000 cash into her account, it was ‘‘nothing more than an informal transfer system’’.
At least that was how she saw it. For Detective Sergeant Andrew Dunhill however, whose undercover Police and Customs team witnessed the transaction on August 15, 2017, it was another name to add to the list.
It was a growing tally of suspects they believed were active in laundering cash made from New Zealand’s largest cocaine importing operation.
The ‘Narco’s New Zealand’ story of how an international syndicate of Australian and Eastern European smugglers landed a total of 76kg of cocaine into the Port of Tauranga, drugs with a value in excess of $10 million, finally came to an end on February 5, 2020 when syndicate members received sentences ranging from 27 to 14 years.
They had entered guilty pleas at the last minute to a raft of charges including importing a class A drug, supplying a class A controlled drug, money laundering and participating in an organised criminal group.
It was an audacious plot that saw the men use Maersk Line container ships travelling down through a number of South American ports to New Zealand as unwitting drug mules, stashing the drugs in an underwater compartment of the ship to be retrieved by one of their number in scuba gear.
The end began in August 2017 however, with Operation Hercules officers keeping tabs on the men after a tip-off from Australian authorities about one of their number, Matthew Scott.
Scott was a ‘person of interest’ due to his connections in the Australian underworld, and with the deported ‘501s’, new faces on the New Zealand crime scene with the cash, clout and connections to make multi-million cocaine deals with South American cartels.
Police and Customs had been watching, and through a number of ‘bugs’ listening to the syndicate ahead of swooping in and seizing 46kg of cocaine in a dawn raid in Tauranga in November 2017.
However, up until now the full story of the parallel money laundering operation has remained largely untold, hidden behind swathes of suppressed court documents.
Now, after months spent accessing those court documents and conversations with the detective in charge of Operation Hercules, officers involved in the wider battle against drugs and global experts on the worldwide cocaine underground, Stuff can reveal details of how more than $2 million in cocaine cash was laundered.
It was helped by an accident of timing, and it was stunning in its simplicity.
Walk into a bank or money remitter, hand over the cash and off it goes down the wires and out of reach of New Zealand law enforcement.
The timing matters too as it wasn’t until November 1, 2017 that an amendment to the Anti-Money Laundering and Countering Financing of Terrorism Act required cash transactions exceeding $10,000 to be notified to police.
Up until that point the much vaguer requirement existed for reporting of ‘suspicious’ transactions only.
That’s why, according to the Massey University Professor of Banking David Tripe, it’s hard to ascertain whether ASB contravened any laws with the ‘Ms Do’ deposit.
However, he did say ‘‘anyone with $100,000 in cash should raise flags’’.
That, initially, was Dunhill’s view too, until he looked further into ‘Ms Do.’
‘‘For her it’s nothing more than an informal transfer system.’’
He said parts of Asia have a deeply ingrained, ‘‘cash heavy system’’.
‘‘Thousands of years, you’ve got to weigh that up.’’
That culture, and what she believed was a cash transfer to an ‘‘auntie in Vietnam’’ saved Ms Do from arrest.
For the woman that handed her the $100,000 however, there was no escape.
Her name was Thi Lieu Le, an Australia-based Vietnamese beauty salon owner who over several trips to Auckland, laundered $1,295,000.
It was on August 15, 2017 she was seen meeting one of the syndicate, a Croatian former Special Forces soldier who saw action in the chaotic Balkan wars of the 1990s, called Mario Habulin.
It was Habulin that donned the scuba gear to retrieve the cocaine.
He was also the man who gave Le a bag and, according to the undercover Customs officers who observed the handover, ‘‘the bag appeared heavy and Le struggled to carry it’’. It contained $398,500 in cash.
‘‘Later you [Le] were seen leaving your hotel carrying a white plastic bag that contained $100,000 in cash.’’
That was the ‘Ms Do’ deposit.
At Le’s sentencing on August 24, 2018, at Tauranga High Court, her role was described as a ‘‘cash collector’’.
‘‘Relatively low in the hierarchy but still crucial.’’
When Le was unable to make meetings with the syndicate, or simply needed another pair of hands, Dean Tianda Yang stepped in.
According to court documents, on one occasion in September 2017 he met Habulin at an Auckland gym, returning to his address.
‘‘He gave you a black cargo bag containing $500,000 in cash.
Later you arranged to meet a person well known to the New Zealand [Police] Financial Intelligence Unit.’’
That man was Xiaolan Xiao, whose money transfer company was ordered to pay $5.3 million in penalties for antimoney laundering breaches in 2017.
Xiao was sentenced to six months community service in August 2018 after pleading guilty to one charge of money laundering of $50,000 for the syndicate. It’s a figure a number of sources close to the case believe falls woefully short of the full amount he is believed to have laundered.
As for Le, she pleaded guilty to four money laundering charges and was sentenced to three years’ imprisonment on August 24, 2018.
She served just seven months before being released on parole with a special condition ‘‘not to return to New Zealand’’.
Yang also plead guilty to four charges of money laundering, having handled approximately $1.6 million, receiving a three year sentence on June 21, 2019, serving just under a year. He was also described at sentencing as having a ‘‘cash collector role’’.
‘‘I cannot infer from the summary of facts that you knew the money you were collecting was drug money,’’ said Judge
Edwards.
In a written statement to Stuff, ASB chief risk officer Carl Ferguson said that they take their ‘‘responsibilities under the Anti Money Laundering and Counter Financing of Terrorism Act very seriously’’.
However, legal restrictions also confirmed by Detective Inspector Christiaan Barnard, manager of the police Financial Intelligence Unit, prohibit them from commenting on whether they reported the ‘Ms Do’ deposit to police.
Ferguson did say however that ‘‘all suspicious transactions are reported to the New Zealand Police Financial Intelligence Unit. ASB has modern and effective systems in place to monitor and report activity which is potentially illegal.
‘‘We are committed to playing our part to combat this activity and reduce moneylaundering both in New Zealand and globally.’’
COCAINE 101
He infiltrated Columbia’s notorious Medellin Cartel, made $1m cocaine deals, investigated corrupt South American politicians and ‘‘murder for hire organisations’’ – and all undercover as a special agent of the US Drug Enforcement Agency.
And over 15 pages that would have been presented as Crown evidence had the Tauranga syndicate opted for a jury trial, Supervisory Special DEA Agent Louis D’Ambrosio offers a guide to how the global cocaine underworld operates.
Under a sub-heading entitled ‘general drug experience’ D’Ambrosio outlines what reads like a Hollywood movie pitch, with investigative work across the globe and extensive use of confidential sources, wiretaps, undercover operations, drug buys and financial analysis.
One operation in Columbia, dubbed Operation Wide Wake, saw D’Ambrosio make ‘‘several maritime seizures netting multiple tons of cocaine, including one single nine-ton seizure’’.
The D’Ambrosio document offers a guide to how leaves in the jungles and forests of South America are transformed into white powder on mirrors across the globe, and how the price jumps at each step of the way.
Of the 200 species of coca plant found in South America, just two are considered ‘‘desirable’’ for cocaine manufacture due to their high cocaine alkaloid levels. The average price for coca leaves is approximately US$0.71 per kilogram, cocaine ‘‘paste’’ has a value of US$600 a kilogram, cocaine ‘‘base’’ US$800 a kilogram.
By the time that kilogram of cocaine has been transported, bribes paid and taxes imposed by other criminal groups, it can wholesale in the United States for as much as US$50,000 a kilogram.
Geography has a huge role to play in the price structure too, with a kilogram of the drug costing as little as US$12,000 close to the Mexican border, rising to US$133,000 in Finland.
In New Zealand, that kilo of cocaine retails for around NZ$140,000.
That price hike, and what D’Ambrosio says is a fear among South American cartels of extradition to the US, has helped prompt a push into other markets.
‘‘Many Latin American drug trafficking organisations have expended their exportations to other markets around the world, such as Europe, Asia and Oceania [which includes New Zealand] where they can fetch significantly more money for the same cocaine without the same perceived risk of extradition,’’ he said.
His report also outlines how large scale cocaine deals are often put together.
‘‘Orders for cocaine are typically placed by the drug organisation’s cell head. The cell head is usually located within a specific consumer country of location and is responsible for interacting with wholesale and retail organisations within that particular consumer country or location and communicating with the drug trafficking organisation based in Latin America,’’ he said.
‘‘The cell head will determine the amount of drug needed and will arrange for its shipment with the Latin America based counterparts.’’
He said that typically large scale drug buys are purchased on consignment and once successfully delivered to their destination, ‘‘payment is typically expected within a few days to a few weeks’’.
‘‘Human beings are sometimes used as collateral to ensure payment.
‘‘In this case, a relative or close friend may remain with the supplier until payment is made.’’
DEMAND, PRICE AND ‘THE RIGHT CRIMINAL CONNECTIONS’
High prices plus demand mean New Zealand Police can expect to see more cocaine cartels target the country.
That’s the view of Scott Stewart, former US State Department investigator and vice president of tactical analysis at Stratfor, the geopolitical intelligence unit of the RANE network.
Stewart said New Zealand’s high prices for cocaine, and the demand from users, ‘‘are definitely driving factors for narcotics smuggling. But also having the right criminal connections also play a part’’.
Stewart said he was unsurprised at the presence among the Tauranga syndicate of Australians and Eastern Europeans.
‘‘This really illustrates the breadth of the threat and how profits will draw different criminals together to co-operate,’’ he said.
He also offered insight into how such a deal could be put together.
‘‘They likely had to purchase their bulk cocaine from one of the Columbian groups producing it, or from a middle man who brought it to another country since they said they wanted to avoid Columbia and Venezuela,’’ he said.
‘‘I would not be surprised to learn the Eastern Europeans were the ones who had the contacts in the region.
There is a significant flow of cocaine smuggled from South America to Europe and that runs through the Balkans.’’
‘‘Increasing cocaine seizures suggest that cocaine activity is growing nationally.’’
National Drug Intelligence Bureau manager John O’Keeffe
‘UNLIKELY COCAINE USE WILL REMAIN LOW IN NEW ZEALAND’
For an idea of what’s going up people’s noses, go down into the sewers.
That’s exactly what the National Drug Intelligence Bureau did in December 2016, expanding to three sites in August 2017, with wastewater testing programmes at Auckland’s Rosdale suburb, Christchurch and Whangarei.
In a formal statement by the Bureau’s national manager John O’Keeffe, which would also have been submitted as Crown evidence had the syndicate members opted for a jury trial, he said the analysis found an average of 107g of cocaine was consumed across the three test sites each week.
‘‘Which could translate to approximately $130,000 per week or almost $7m annually in social costs.’’
O’Keeffe said the sample size equated to 647,000 people, or 13 per cent of New Zealand’s population.
He said wastewater analysis was also helping shed light on cocaine consumption in New Zealand, something he said had been ‘‘historically unclear’’ due to a lack of previous data.
‘‘Wastewater drug testing has overcome this barrier and estimates that 5.56kg of cocaine is consumed annually across the three test locations, which could translate up to 11,000 people.’’
He said their analysis also found cocaine use escalated sharply in June 2017 and continued increasing until October 2017, after which it began to decline.
This spike, according to Dunhill, is ‘‘almost to the very day’’ the Tauranga syndicate began landing their cocaine.
‘‘Despite the lack of insight into the extent of cocaine use, intelligence holdings and increasing cocaine seizures suggest that cocaine activity is growing nationally,’’ O’Keeffe said.
‘‘It is unlikely that cocaine use will remain low in New Zealand.’’