Commissioner of the Australian Federal Police v Marundrury [No 2]

[2017] WASC 105

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE -v- MARUNDRURY [No 2] [2017] WASC 105

CORAM:   ALLANSON J

HEARD:   22 MARCH 2017

DELIVERED          :   13 APRIL 2017

FILE NO/S:   CIV 1432 of 2016

MATTER                :An Application pursuant to Section 19 of the Proceeds of Crime Act 2002 (Cth)

Real property located at 2A Crana Place, Karawara, Western Australia, and Funds standing to the credit of Bank Accounts listed in Schedule 'A'

BETWEEN:   COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE

Applicant

AND

DELANIA MARVELLA MARUNDRURY
First Respondent

WIDYA SASKIA LIMAHELU
Second Respondent

DJURJUR FONA ZIDUHU MARUNDRURY
Third Respondent

Catchwords:

Evidence - Export report - Whether report admissible - Turns on own facts

Legislation:

Anti-Money Laundering and Counter-Terrorism Act 2006 (Cth), s 142
Criminal Code Act 1995 (Cth), s 400.9
Proceeds of Crime Act 2002 (Cth), s 29, s 31, s 329, s 330

Result:

Evidence ruled inadmissible

Category:    B

Representation:

Counsel:

Applicant:     Ms L Black

First Respondent           :     Mr E W L Greaves

Second Respondent      :     Mr E W L Greaves

Third Respondent          :     Mr E W L Greaves

Solicitors:

Applicant:     Australian Federal Police - Proceeds of Crime Litigation

First Respondent           :     Access Law Lawyers

Second Respondent      :     Access Law Lawyers

Third Respondent          :     Access Law Lawyers

Case(s) referred to in judgment(s):

Director of Public Prosecutions v Le [2007] VSCA 18; (2007) 15 VR 352

Majeed v The Queen [2013] VSCA 40

Re Application Pursuant to Section 19 of the Proceeds of Crime Act 2002 (Cth); Ex parte Commissioner of the Australian Federal Police [2016] WASC 105

1. ALLANSON J:  I have been asked to rule, in advance of the hearing, whether an expert report on money laundering techniques, in particular a practice known as 'cuckoo smurfing', is admissible when considering whether the respondents have shown that their interest in several bank accounts was not the proceeds of or an instrument of an offence.  It is not in dispute that money was deposited into the respondents' bank accounts in a manner likely to be an offence under legislation prohibiting money laundering. 

Background

1. On 22 March 2016, on the application of the Commissioner of the Australian Federal Police, I made restraining orders relating to bank accounts in the name of Delania Marvella Marundrury and Widya Saskia Limahelu, two joint accounts, and a house and land in Karawara. The application was made under s 18 and s 19 of the Proceeds of Crime Act 2002 (Cth).

2. Djurjur Fona Ziduhu Marundrury was added as the third respondent by consent on 13 December 2016.

3. The respondents have applied to exclude property from the restraining order.  The exclusion application has not yet been listed for hearing.  The parties have, however, filed evidence, including an affidavit and expert report filed by the respondents. 

4. The Commissioner's submissions fall under three heads.  First, the whole of the report is inadmissible on grounds of relevance.  Second, although not strongly pressed, the Commissioner questions whether the report is with respect to matters that are properly the subject of expert evidence.  Third, parts of the report should be excluded on the ground that the expert offers opinions and conclusions on matters that are for the ultimate trier of fact.

5. References in these reasons to legislation are, unless otherwise indicated, to the Proceeds of Crime Act.

The proposed evidence

1. The respondents propose to lead expert evidence from Murray James Smith, a former member of the Australian Federal Police.  Mr Smith has provided a report, in which he was asked to address the following matters:

   (a)his background and experience in investigating and training others to investigate money laundering activities, together with any other matters that are relevant to qualifying him as an expert in expressing opinions about money laundering activities;

   (b)to explain the following terms and their origins:

   (i)informal money transfer system;

   (ii)alternative remittance system;

   (iii)informal value transfer system; and

   (iv)designated remittance services;

   (c)to advise of the prevalence of use of the above to exchange and remit funds internationally out from Indonesia;

   (d)to explain the origin of the expression 'cuckoo smurfing' and explain the usual process of 'cuckoo smurfing';

   (e)to explain why money laundering syndicates engage in 'cuckoo smurfing';

   (f)to explain the popularity of 'cuckoo smurfing' by reference to other forms of money laundering, and to express an opinion as to why 'cuckoo smurfing' enjoys whatever popularity it has;

   (g)to explain how 'cuckoo smurfing' activities are brought to the attention of:

   (i)financial institutions; and

   (ii)regulatory and/or law enforcement agencies;

   (h)to review banking records provided and express an opinion as to whether any of the transactions are indicative of money laundering activity (including cuckoo smurfing) having been engaged in;

   (i)in respect of money laundering activities which he had observed in his investigations involving foreign money service businesses where:

   (i)foreign currency was provided to such businesses in the foreign jurisdiction for exchange and remit to Australia in Australian dollars;

   (ii)the Australian currency was deposited in Australian bank accounts in a series of non‑threshold transactions (less than $AUD10,000) indicative of 'structuring';

   to advise of the frequency with which, in his opinion, the persons providing the funds to the money services businesses for exchange and remittal to a foreign jurisdiction were criminally involved in, or aware of, such money laundering.

   (j)to advise what matters/indicia would cause him to believe that a person remitting money to Australia through a money services business in a developing country was himself of herself involved in money laundering activities;

   (k)(this question and that part of the report were not pressed);

   (l)to advise whether there are any particular matters/indicia which he had observed from the material provided which would either suggest that, or suggest against, either of the respondents being involved in any money laundering activity;

   (m)to advise whether he considered his official secrecy obligations inhibit him from providing further examples in support of any of his answers to any of the above.

2. In general terms, the first 60 paragraphs of his report are directed to questions (a) to (g).    

3. Before considering the objections, it is necessary to put the evidence in context.

The factual background

1. The following is brief factual background, based on affidavits of Federal Agent Gareth Alexander Reilly, dated 14 March 2016 and 22 March 2016, which I gave when making the restraining orders:  see Re Application Pursuant to Section 19 of the Proceeds of Crime Act 2002 (Cth); Ex parte Commissioner of the Australian Federal Police [2016] WASC 105:

   30DMM and WSL are residents of Indonesia. Between February 2013 and December 2015, DMM was frequently in Australia, often for periods of three months or more.  WSL was in Australia on seven occasions, although generally for much shorter visits.  Her longest stay was only about four weeks, and five of her visits were for a week or less.

   31During her time in Australia, DMM opened 13 bank accounts with the Commonwealth Bank of Australia at branches in Western Australia.  I will identify accounts by the last four numbers in the account number.

   32On 19 February 2013 she opened account number 7244. Currently the account balance is insignificant just over $3,000, but the transactions on this account over the period from April 2013 to November 2014 are far from insignificant.  Those transactions found the application relating to DMM. No order is sought for account number 7244, it being accepted that it is currently being used by DMM for her living expenses.

   33WSL also opened two accounts at a Perth branch of the Commonwealth Bank, on 11 April 2014: account numbers 7076 and 7084. She gave DMM authority to operate the accounts.  On 13 October 2015, DMM and another person opened a joint account at another branch of the Commonwealth Bank in Western Australia.  On the same day, DMM and WSL opened a joint account at the same bank (account number 7560).

   Transactions on account number 7244

   34The account was opened with a cash deposit of $2,000, half of which was withdrawn after about two weeks.  At the beginning of April 2013, the balance was about $9,000.  The account was regularly used - apparently as a general account, with payments out for living expenses such as food and clothes.  Occasional deposits were made by transfer of funds.

   35On 2 April 2013, two cash amounts were deposited into the account: $9,000 and $1,000.  On 18 April, two cash deposits totalling $10,000 were again made (this time $6,000 and $4,000).  Similar cash deposits were made again on 2 May (two deposits with a total of $10,000), 27 and 28 June (five deposits for a total of $20,000), and 22 July (two deposits for a total of $10,000).

   36Beginning in February 2014, there were many such cash deposits ‑ none of the individual deposits was more than $9,500, but multiple deposits on the same day frequently resulted in cash into the account of amounts greater than $10,000.  For example, on 25 February 2014, 12 deposits were made, nine of them were for $9,500.  The sum of $100,000 was deposited on that day. Between 6 and 17 March 2014, $200,000 was deposited in 24 transactions, none of which exceeded $9,400.  On 24 and 25 March 2014, $60,000 was deposited in nine separate transactions.

   37The pattern of large sums going into the account by cash deposits, none greater than $9,500 and many on the same day, continued until October 2014.  The deposits were made in New South Wales and Victoria.  During the period of approximately 20 months between February 2013 to October 2014, 175 non-reportable transactions were made.

   38During that period, money was also transferred out of the account, often to three other accounts in the name of DMM: account number 4827, account number 4835, and account number 6789.  Of these, only account number 6789 has a significant current balance.

   39There were other transfers and withdrawals from account number 7244 which link it to seven other accounts in DMM's name, which have more substantial current balances, and a property purchased by DMM and WSL at 2A Crana Place in Karawara.

   40Agent Reilly suspects that a series of transfers from the account tie account number 7244 to the purchase and construction of a home on 2A Crana Place, Karawara:

   1.on 15 April 2014, a transfer of $527,994.32 from the account matches the total purchase costs, stamp duty and rates for the property; and

   2.six transfers from the account have the reference Collier Homes P/L or '2A Crana Place'.

   Transactions on WSL's accounts

   41A similar pattern is demonstrated on analysis of the transactions on WSL's accounts. Account number 7076 was opened with a $500 deposit on 11 April 2014.  Money was deposited into the account in 58 cash deposits between 7 February and 30 March 2015.  Starting in February 2015, multiple cash deposits were made, all below $10,000 but with the total frequently exceeding that amount on one day, and far exceeding it over a very short period.  For example, $40,000 was deposited in five amounts on 18 and 19 February 2015; $120,000 in 22 separate amounts between 6 and 13 March 2015.

Issues arising on the exclusion application

1. The property at issue is the respondents' interests in bank accounts and the house and land bought with funds from the respondent's accounts.

2. A person may apply to the court that made the restraining order for an order excluding a specified interest in property from the restraining order: s 29, s 31. The matters required to be proved on the exclusion application are found in s 29(1) and (2), which, relevantly to this application, state:

   (1)The court to which an application for a restraining order under section 17, 18 or 19 was made must, when the order is made or at a later time, exclude a specified interest in property from the order if:

   (a)an application is made under section 30 or 31; and

   (b)the court is satisfied that the relevant reason under subsection (2) or (3) for excluding the interest from the order exists.

   (2)The reasons for excluding a specified interest in property from a restraining order are:

   …

   (c)for a restraining order under section 18‑the interest is neither:

   (i)in any case‑proceeds of unlawful activity; nor

   (ii)if an offence to which the order relates is a serious offence‑an instrument of any serious offence; or

   (d)for a restraining order under section 19‑the interest is neither:

   (i)in any case‑proceeds of an indictable offence, a foreign indictable offence or an indictable offence of Commonwealth concern; nor

   (ii)if an offence to which the order relates is a serious offence‑an instrument of any serious offence.

3. Chapter 6, pt 6-1, div 1 contains detailed provisions about when property is proceeds and an instrument of an offence. Section 329 prescribed when property is proceeds of an offence or an instrument of an offence. It looks to the relationship between the property and the commission of the offence. Section 330 prescribes when property becomes, remains and ceases to be proceeds or an instrument. Section 330(1) and (2) looks to the relationship between the subject property and dealings with other property which, at the time of the dealings, was the proceeds or an instrument of an offence. Section 330(4) provides for when property ceases to be proceeds or an instrument.

4. In applying to restrain the property, the Commissioner relied on offences under s 400.9 of the Criminal Code (Cth) and s 142 of the Anti‑Money Laundering and Counter‑Terrorism Financing Act.  The way in which the money was deposited into the accounts is central to both offences.  Both require consideration of whether a person has engaged in transactions that are structured or arranged to avoid the reporting requirements of the Anti-Money Laundering and Counter‑Terrorism Financing Act.  Transactions must be reported where they involve the transfer of physical currency, where the total amount of physical currency transferred is not less than $10,000:  Anti-Money Laundering and Counter‑Terrorism Financing Act s 5, s 43.

5. For present purposes, it is sufficient to assume that, if money was deposited into the respondents' bank accounts in breach of s 142 or the Anti‑Money Laundering and Counter-Terrorism Financing Act, or dealt with in breach of s 400.9 of the Code, and subject to s 330(4)(a), the respondents' interest in their accounts would be both proceeds of an offence and an instrument of an offence.

6. Section 330(4)(a) deals with when property ceases to be proceeds of an offence or an instrument of an offence. The factual issue under s 330(4)(a) is whether the respondents' interests in the bank accounts was acquired by them as third parties for sufficient consideration without them knowing and in circumstances that would not arouse a reasonable suspicion that the property was proceeds or an instrument of an offence or unlawful activity.

7. Whether a person had reasonable grounds for suspecting that the property was derived or realised from unlawful activity is also in issue when considering the offence under s 400.9(1) of the Criminal Code:  see s 400.9(5). 

The admissibility of Mr Smith's report

1. Both parties ask the court to infer that the cash deposited into the respondents' bank accounts in Australia was either proceeds or an instrument of money laundering.  The respondents' case is that the court should infer that the money in the bank accounts opened in Australia was cash given to a remitter in Indonesia who dishonestly withheld it, enabling a corresponding sum to be laundered by criminals acting in Australia using the method known as cuckoo smurfing.  The respondents further argue that the nature of cuckoo smurfing is that, when they gave money to be remitted to Australia and received it as deposits into Australian bank accounts, they were not aware that it was, or became, the proceeds or an instrument of an offence.

2. There have been some decisions where cuckoo smurfing has been described:  see, for example, Majeed v The Queen [2013] VSCA 40 [7]. But what is involved in cuckoo smurfing, and money laundering more generally, falls into an area where certain groups of people have knowledge not shared by all.

3. I am satisfied that Mr Smith is qualified as an expert in the sense that he has knowledge from his study of and experience in investigating money laundering that the court and the public generally does not have.  He speaks of things that, in his experience, are characteristic, or may be regarded as indicia of a cuckoo smurfing operation:  see, in particular, pars 20 to 23.  His evidence is essentially informative, setting out what he has observed on other occasions.  Counsel for the Commissioner compared his evidence to experienced police officers testifying about words commonly used among drug dealers and drug users, or testifying about items frequently found and possible indicia of drug dealing.  Such evidence is commonly received.

4. The Commissioner, however, objected to the report on the ground that there is no evidence that what occurred was in fact cuckoo smurfing. 

5. The ultimate facts in issue at the hearing are set out in s 29; behind the ultimate issues there will often be many issues about facts relevant to facts in issue. Unless Mr Smith's report is capable of being logically probative of relevant facts, and does not just invite speculation about what might have occurred, it is irrelevant. When regard is had to the limited questions raised on the application, I am satisfied that the evidence cannot be led.

6. The court is not concerned with whether the transactions were cuckoo smurfing, or money laundering in any general sense.  The questions posed by the Anti‑Money Laundering and Counter‑Terrorism Financing Act, and indirectly by the Criminal Code, are much more specific. Where there are two or more non reportable transactions, the court must look at the evidence about the manner and form in which they were conducted. The question under s 142(1) is whether it would be reasonable to conclude that someone conducted them, or caused them to be conducted, in that manner or form 'for the sole or dominant purpose of ensuring, or attempting to ensure, that the money or property involved in the transactions was transferred in a manner and form that would not give rise to a threshold transaction that would have been required to have been reported under section 43'. The court must look to, but is not confined to, the matters in s 142(3):

   (a)the value of the money or property involved in each transaction;

   (b)the total value of the transactions;

   (c)the period of time over which the transactions took place;

   (d)the interval of time between any of the transactions;

   (e)the locations at which the transactions took place.

7. There are occasions when expert evidence may be required to understand the financial effect of a particular transaction, to assist in determining the purpose behind entering into it. But this is not a case of that kind. The question for the court is whether the purpose of structuring the transactions in a particular manner was so as to not give rise to a transaction that has to be reported. It is an issue on which the court does not require expert assistance. The court is not concerned with wider questions, addressed by Mr Smith, about the prevalence of cuckoo smurfing or its benefit to international criminal syndicates. Nor should it speculate about the security measures employed within syndicates. The court is concerned with the much more limited issue of whether the transactions were for the purpose set out in s 142(1).

1. The other issue for the court to determine under s 330(4)(a) is whether the respondents acquired their interest in the property in circumstances that would not arouse a reasonable suspicion that the property was proceeds of an offence or an instrument of an offence. The relevant test for reasonable suspicion is that stated in Director of Public Prosecutions v Le [2007] VSCA 18; (2007) 15 VR 352 [24] (Maxwell P & Chernov JA): would a reasonable person, in their position and knowing what they knew, have formed a suspicion. Similar questions arise under s 400.9(5) of the Criminal Code.

2. Mr Smith's report cannot assist on what were the circumstances in which the respondents acquired their interest.  That is a question to be determined on the evidence of how the transactions occurred.  He cannot testify about what they knew. And he cannot speak to whether a reasonable person in their position, knowing what the respondents knew, would have formed a suspicion.  The reaction of a reasonable person in the circumstances is not a question for expert opinion. 

3. Finally, Mr Smith addresses issues such as the legal culpability of the respondents (par 64); whether the respondents are 'innocent victims' (par 68); whether other transactions raise any suspicion of money laundering (par 73); whether the material indicates the respondents had knowledge about what was occurring, or whether Mr Smith suspects that the deposits were made without their knowledge or authority (pars 74, 75); who would be persons of interest in a criminal investigation (par 83); the likelihood that a money remittance has been 'hijacked' (par 103).  These are not issues for the opinion of a witness, expert or otherwise.

Conclusion

1. I would not allow into evidence any of Mr Smith's report.