New Zealand Law Society - AML/CFT developments

AML/CFT developments

Former lawyer sentenced for money laundering

Former lawyer Andrew Neill Simpson has been sentenced to two years and nine months’ imprisonment after pleading guilty on 27 November 2019 to 13 charges of money laundering under section 243(2) of the Crimes Act 1961.

Mr Simpson surrendered his practising certificate upon his guilty plea.

In his 25 February 2020 sentencing notes (R v Daniels and Simpson [2020] NZHC 275), Justice van Bohemen said Mr Simpson was the solicitor employed by members of and people affiliated with the New Zealand chapter of the Comanchero motorcycle gang, an organised criminal group.

A Police investigation which began in 2018 uncovered a sophisticated operation for the importation and supply of controlled drugs and associated money laundering. Mr Simpson and Comancheros Vice President Tyson Terei Daniels were arrested, along with seven other co-accused who will go on trial in September 2020.

“The money was deposited into structured trust accounts, usually in amounts of less than $10,000 at a time at various bank branches in an effort to disguise their origin and to avoid raising suspicion. To further avoid detection, the money was also channelled through associated companies such as Heavy Heavy Ltd, which provided an apparently legitimate source of income for Mr Daniels and others in the group and was also used to launder funds derived from criminal activity,” van Bohemen J said (at [6]).

Justice van Bohemen said that as the gang’s solicitor, Mr Simpson was the facilitator of the money laundering operation.

Knew it was “dodgy”

“You used your specialist knowledge as a lawyer to advise on structuring the laundering scheme across the multiple trust accounts you set up. You also channelled money through your solicitor’s trust account and made deposits into the accounts yourself. You knew what you were doing was dodgy. Intercepted phone calls reveal that you told one of the others involved in the scheme that if he deposited ‘nine’ at each ‘drop’ it would not get ‘flagged’ by which you clearly meant avoiding the banks’ reporting thresholds,” he said (at [9]).

About $1.2 million was deposited or transfered into accounts Mr Simpson established for the scheme. He retained a little over $18,000 as remuneration for his work as a lawyer. The balance was transferred into trust accounts Mr Simpson set up for gang members. Using cash laundered through his trust account, he authorised payments on behalf of the trusts and made payments directly to luxury motor dealers for vehicles purchased by gangsters – including two Rolls Royces, a Bentley, a Lamborghini and two top-end Mercedes Benz. He also assisted in the purchase of a $1.4 million property using several different trust accounts and creating another purpose-built trust account for the transaction to avoid detection.

Mr Simpson contested the quantum particularised in the charges to which he had pleaded guilty, which came to a total of just over $2.2 million. His counsel argued that he should be sentenced on the basis that he dealt culpably with just over $1.4 million.

“Having regard to section 24(2) of the [Sentencing] Act [2002], I have indicated that I do not regard the difference between $1.4 million and $2.2 million as materially different in the context of offending by a man in Mr Simpson’s position and the difference in amounts has not affected the starting point I set for your sentence or the overall length of the sentence,” Justice van Bohemen said (at [15]).

Starting point

In setting the starting point of Mr Simpson’s sentence, Justice van Bohemen had regard to the following circumstances:

  • He was a key facilitator of the money laundering scheme and made it work. He set up the trusts through which the funds flowed.
  • He made it work because of his position as a lawyer and member of a professional body. He used his professional skill and knowledge and solicitor’s trust fund both to make it happen and lend respectability.
  • He did not just set up the legal and administrative arrangements to enable the operation, but took part in it personally and advised others on how to avoid triggering the banks’ reporting thresholds.

Mr Simpson said he was duped and he did not appreciate the nature of the transactions in which he had become involved. However, he acknowledged that he had suspicions that some of the transactions may have involved tax avoidance. He said he turned a blind eye to the source of the funds.

It was only very late in the offending, in November 2018, that Mr Simpson undertook his own investigations and appreciated that his clients had been deported from Australia for gang-related offending. “Even then, however, you continued your involvement,” van Bohemen J said.

“There can be little doubt that you were at least naive and incredibly foolish to get involved in this scheme. I accept that you did not know directly, as Mr Daniels knew, that you were involved in laundering funds from serious drug offending. I also accept that the fee charged for your time would not have been unreasonable had your advice been for setting up trusts to enable lawful transactions, and that in comparison to the benefits enjoyed by Mr Daniels, the benefits of your participation in the operation were modest.” (at [44]).

However, van Bohemen J could not accept that Mr Simpson’s culpability stopped at naivety and foolishness, even for the period until he made his belated inquiries.

“[45] By your own admission you knew that things were not right. You say you suspected tax avoidance. You say you had doubts as to the veracity of the assurances you were given that the funds came from business activities, gambling, or the sale of luxury cars. But you chose to continue.

“[46] In your own words, you turned a blind eye to the source of the funds. I am satisfied that in so doing you were reckless not just to the possibility that the funds came from activities such as tax avoidance or gambling but also to the possibility that they came from much more serious offending, including drug offending. The amounts and numbers of transactions themselves ought to have put you on notice...”

In addition, Mr Simpson was acting in his professional capacity “and when you chose to continue your involvement, even when your suspicions were raised, you not only placed your personal gain above your duties as a lawyer but you risked bringing your profession into disrepute. That is a significant distinguishing factor.” (at [47]).

Compared to Mr Daniels (who was sentenced to four years and eight months’ imprisonment with a starting point of six years for nine charges of money laundering and one of participating in an organised criminal group), there was a significant difference between Mr Simpson’s situation of largely reckless involvement in a scheme devised by others with only modest personal gain, and that of Mr Daniels who knew exactly what was going on and gained a substantial personal benefit.

A starting point of four years and six months’ imprisonment was appropriate for Mr Simpson.

Mitigating factors

Mr Simpson’s Pre-Sentence Report stated that he felt huge regret, that he had found the experience humiliating and that he said that his offending stemmed from naivety, although he acknowledged that things “ramped up”. The report writer had noted he had strong family and community connections.

“The writer acknowledges that the magnitude of your offending is such that a custodial sentence would be warranted but, taking account of the solid support that you have from family and friends, recommends a sentence of home detention to be followed by 12 months of post detention conditions,” Justice van Bohemen said (at [37]).

“You and your father, who is also a practising lawyer, have worked out an arrangement under which you might continue to provide advice on matters within your professional competence, even taking into account the fact you have surrendered your practising certificate and the likelihood that you will be disbarred from practising as a lawyer for a period. You have a supportive wife and five young children under the age of 13. The Court has received many letters in support attesting to your usually good character. You have also written explaining your regret and remorse and the toll on you and your family.”

Justice van Bohemen said he was satisfied that Mr Simpson’s remorse was genuine as was his commitment to rehabilitation. These factors, combined with the lack of a previous criminal record, the strong community support he continued to enjoy, and the support of his family warranted a substantial discount of 15%. That reduced his sentence to three years and nine months’ imprisonment, to which was added a further reduction of 12 months for an early guilty plea. That produced an end sentence of two years and nine months’ imprisonment.

AML/CFT regulatory findings report released

A disconnect between a business’ risk assessment and AML/CFT programme, and how these documents are used in practice was a common factor observed by the Department of Internal Affairs in its Regulatory Findings Report for Anti-Money Laundering and Countering Financing of Terrorism for the year to 30 June 2019.

It says the report shares its regulatory findings for the businesses it supervises – which includes lawyers and conveyancers – to assist them to understand the DIA expectations, and how they can improve their systems and processes to comply with their AML/CFT obligations.

On the disconnect between assessment and practice, the report says the department inspected businesses with well-written documents that seemed “technically compliant” on paper, but when they were visited their procedure, policies and controls were seen not to be effectively implemented.

“Many businesses have adopted generic templates for their risk assessment and AML/CFT programme documents. In some circumstances, the content has been wholly generic and not specific to their business, types of customers, transactions or activities conducted,” it says.

“While a template can be a useful starting point for a risk assessment or developing an AML/CFT programme, the Act requires the identification of the specific money laundering and financing terrorism risks that a particular business faces. The risk assessment must also enable the business to determine the level of risk in relation to its AML/CFT obligations. This means the risk assessment must be specific to the individual business’ circumstances, customers and activities. The risks must then be managed and mitigated through its AML/CFT programme.”

Areas of non-compliance

The report identifies the most common areas of non-compliance in the year to 30 June 2019:

  • Risk assessments too generic and not specific to the money laundering and financing terrorism risks the business faced.
  • Written documents incomplete and not covering all the relevant obligations. These include a lack of procedures for politically exposed person (PEP) checking, beneficial ownership checks, enhanced customer due diligence, suspicious activity and prescribed transaction reporting.
  • The written AML/CFT programme documentation is technically compliant but not implemented effectively in practice.
  • Compliance officers’ inadequate understanding of their businesses’ money laundering and financing terrorism risks, and poor implementation of policies, procedures and controls in practice.
  • Customer due diligence (CDD) and Enhanced CDD not undertaken in accordance with the Act’s requirements.
  • The compliance officer does not have the required level of influence in the business to escalate issues and ensure governance level support for the AML/CFT programme.
  • Insufficient training and vetting of senior management, compliance officers and any staff member with AML/CFT duties.
  • AML/CFT risk assessment and programme documents not kept up to date, with no version control used.
  • Frequency of inspections.

In the year to 30 June 2019 the department says it completed 149 desk-based reviews and 49 on-site inspections. These resulted in 60 remediation plans, as well as other regulatory action – including formal warnings and one enforceable undertaking.

Videos to help with AML/CFT understanding

The Department of Internal Affairs has released a series of videos, Keeping New Zealand in Business for Good.

The series aims to help businesses and their employees understand the AML/CFT Act and what is required to protect businesses, and New Zealanders, from the social and economic harm caused by money laundering and terrorism financing.

The four titles are: “The ugly business of dirty money”, “Dirty money dirties business”, “Beware of the signs of business unusual”, and “Shining a light on dark money”.

The department says the four videos can be shared with front line staff, other employees or anyone else that could use help in understanding what they need to do and why it’s important.

They can be viewed on the DIA’s website, at www.dia.govt.nz/AML-CFT-videos

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