AFP smashes alleged $10 billion Chinese money-laundering operation

Also arrested and charged in Sydney was a mid-ranking employee of the National Australia Bank, Chen Zhang. Others charged include an accountant and a lawyer.

The NAB worked closely with the federal police and is one of several of the big four banks, along with second and third-tier lenders, to be targeted by the syndicate.

Houses bought by syndicate members and seized by the federal police included two luxury homes in Vaucluse and Bellevue Hill with a combined value of $19 million, a $22 million tower in Burwood and a $21 million five-storey property adjourning Pitt Street Mall in Sydney. Luxury goods including watches and handbags worth millions of dollars were also confiscated.

Federal agents have also seized a 360-hectare plot of land in Cawdor, near Camden, which Ma bought for $47 million in August. Police intelligence suggests the syndicate had aspirations to develop the land into a small suburb, given its proximity to the planned Western Sydney international airport.

The AFP’s Operation Avarus-Midas – named after the ancient Greek king who in mythology could turn objects into gold – has also cast fresh light on legislative and policy gaps that continue to be exploited by criminals, including weaknesses in the visa and financial system that have turned Australia into a soft target for organized criminals seeking to operate here or invest in real estate.

The alleged transnational crime organization, known as the Xin Money Laundering Organization (MLO), exploited Australia’s migration system, with a senior syndicate figure being granted a significant-investor visa and another receiving Australian citizenship despite being a wanted fugitive. A third suspected syndicate member is a federal government registered migration agent who facilitates visas for Chinese nationals.

The Albanian government has already appointed former Victorian police commissioner Christine Nixon to investigate the exploitation of Australia’s migration system by criminals, after this masthead and 60 Minutes revealed how human trafficking, worker exploitation and drug syndicates were disrupting the nation’s visa programs.

The alleged role of a lawyer and migration agent, Chang Hong Liu, and an accountant, Raymond Luo, in the Xin MLO’s operation, as well as its property purchases, will ramp up pressure on the federal government to introduce long-stalled “Tranche 2 ” laws. The laws would force accountants, real estate agents and lawyers to face the same obligations as bankers and casinos to report suspected money laundering.

The ease with which the syndicate bought property also raises questions about the adequacy of the Foreign Investment Review Board in safeguarding Australian real estate and businesses from tainted overseas money.

Sam Boarder, who runs the national security practice at McGrathNicol Advisory, said the booming operations of transnational organized crime had increased the urgency of proceeding with Tranche 2 reforms to anti-money-laundering laws.

“Criminal syndicates are working around our existing countermeasures”, he said.

“The national security risks from these criminal operations are immense, particularly if entangled with foreign government-backed influence platforms. The democratic world is still coming to terms with these massive flows of ‘grey’ unregulated capital, which distort our real estate markets and introduce vulnerabilities into our economic and financial systems.”

A shadow bank is born

The origins of the Xin MLO lie in tycoon Alvin Chau’s SunCity casino junket business, which gained infamy after this masthead and 60 Minutes exposed its involvement in large-scale money laundering at Australian casinos and its links to the Chinese triads, which are secretive and powerful criminal organizations.

The media exposure in 2019 and 2020, and subsequent scrutiny by various casino commissions of inquiry, led to the collapse of SunCity’s Australian operations.

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But one of SunCity’s key lieutenants, Steven Xin, pivoted from the casino trade to a service that allowed high-wealth Chinese nationals to shift funds into Australia and other attractive overseas investment destinations in defiance of China’s capital-flight laws.

The AFP alleges Xin, who fled China, where he is wanted for running an illegal gambling enterprise, obtained Australian citizenship and partnered with Chinese businessman Zhouhua Ma to provide this service.

The pair won the trust of international drug cartels and other crime syndicates seeking another service: the movement of dirty cash – that was earned in countries such as Australia – to China or other offshore locations.

For a 4 to 10 percent cut of every dollar moved, the Xin MLO would collect this suspected dirty cash and provide it to its Chinese customers – who did not have access to their Chinese funds – to fund real estate purchases and other acquisitions abroad.

To pay back the syndicate, these customers would then instruct their Chinese bank to transfer the same amount of money to another Chinese bank account or shelf company that was secretly controlled by the Xin MLO.

Police allege these ghost accounts or shelf companies would then move the funds onto the criminal syndicates that had provided the original funds.

The money scheme also used casinos, crypto-currency and daigou businesses to ensure no actual funds crossed international borders, evading international law enforcement detection.

But it was also in breach of Australian counter-money laundering laws, which require all money-moving businesses to register with regulator AUSTRAC or face accusations of moving the proceeds of crime.

Tracking the trail

Operation Avarus-Midas began after federal agents working on an earlier money laundering operation, codenamed Zanella, began arresting suspects who were carrying bags stuffed with millions of dollars in cash.

Frustrated with their inability to catch more senior syndicate members, police sources said investigators devised a long-term plan to patiently track a money trail to the suspected syndicate’s upper echelons.

While the syndicate engaged in counter-surveillance, including the use of encrypted phone devices, the federal police gradually built a picture of its operations in Australia and overseas.

It meant police were monitoring in February 2022, when a mysterious company called Tara Global Pty Ltd purchased for $21 million a five-storey building at 119 King Street, adjacent to Sydney’s Pitt Street Mall.

The company funded the purchase with $7 million sent from two Hong Kong shelf companies to an account set up at the NAB’s Burwood branch by a woman who claimed to be a wealthy Chinese investor. She had reportedly arrived at the bank in a Lamborghini 4WD.

Police allege that the woman who claimed to represent Tara Global was in fact Xin’s mother-in-law and that she was helping Xin and other MLO syndicate members invest their profits in Australian real estate.

After transferring the $7 million to Sydney, Tara Global then sought further funds from other Australian banks to complete the King Street purchase.

The Commonwealth Bank declined Tara Global’s $11 million loan application as it appeared suspicious, so the figures behind Tara Global contacted an alleged trusted insider at NAB, Chen Zhang. He gave them advice about making a fresh application with another financier, Latrobe Finance.

Police suspect this application was fraudulent. Zhang also allegedly gave the syndicate advice about getting further loans from NAB, but the bank froze Tara Global’s accounts in September.

The MLO was unfazed by the freezing of accounts given that they had previously been able to start new accounts and obtain large loans, police sources allege. The case against Xin and his co-accused will allege that companies were routinely wound up and phoenixed into new corporate structures linked to new bank accounts as financial institutions froze existing accounts due to suspicions about the origins of funds.

AFP Assistant Commissioner Eastern Command Kirsty Schofield described the alleged syndicate and others like it as providing “the lifeblood of organized crime” in Australia and internationally.

“This was a sophisticated, complex syndicate established to facilitate the movement of funds regardless of their origin, purpose or harm caused to the Australian community,” Assistant Commissioner Schofield said.

Most of the nine suspects charged are facing serious money laundering and proceeds of crime offenses related to activities that allegedly took place between 2018 and 2022.

‘A sea of ​​dirty funds’

A unique component of the federal police’s investigation was the behind-the-scenes cooperation of NAB, whose top financial crime investigator is former AFP senior officer Chris Sheehan. Sources said Sheehan and a small team of bank investigators provided the AFP with critical data on the operations’ targets in one of the first examples of a “public-private partnership” in law enforcement. Typically, police have been too suspicious of corporate institutions to work with them.

While the dismantling of the Xin syndicate and freezing of its property assets is significant given that it involves the top levels of a major alleged organized crime operation, federal authorities are privately daunted by the scale of money laundering they are facing.

In June, this masthead revealed how police were tracking another suspected Chinese money laundering syndicate with headquarters in Victoria and NSW that moved hundreds of millions of dollars annually to China and elsewhere.

The “Chen Organization” counts as its customers a relative of Chinese President Xi Jinping, along with Asian triads and bikies, according to briefings from law enforcement officials.

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The ability of the syndicates to operate under the noses of the Chinese government has also raised questions about Beijing’s desire to deal with the problem.

Officials in the United States have directly called out Beijing’s failure to combat money laundering trails that flow through Western countries.

Australian authorities, including the AFP, the Australian Criminal Intelligence Commission, AUSTRAC and the ATO, have recently ramped up efforts to target money laundering, but more than half a dozen sources say they are being hampered by the sheer scale of the problem, inadequate resources and the failure of Beijing to act.