MA v Commissioner of the Australian Federal Police
[2016] VSC 553
•16 SEPTEMBER 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2013 04908
IN THE MATTER of the Proceeds of Crime Act 2002 (Cth)
- and –
IN THE MATTER of property suspected of being proceeds of indictable and serious offences
- and –
IN THE MATTER of an application by HONGJIE MA
| HONGJIE MA | Applicant |
| v | |
| COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE | Respondent |
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JUDGE: | JOHN DIXON J |
WHERE HELD: | MELBOURNE |
DATE OF HEARING: | 15 AUGUST 2016 |
DATE OF JUDGMENT: | 16 SEPTEMBER 2016 |
CASE MAY BE CITED AS: | MA v COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE |
MEDIUM NEUTRAL CITATION: | [2016] VSC 553 |
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PROCEEDS OF CRIME – Application for revocation of a restraining order – Property purchased with money suspected of being proceeds of money laundering at Casinos – Whether any ground exists on which to make a restraining order – Whether in the interests of justice to make order – Application dismissed - Proceeds of Crime Act 2002 (Cth), ss 19, 42(5).
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr R T Barry | Aviva Greenberger Solicitor |
| For the Respondent | Mr S K McGregor | Australian Federal Police |
HIS HONOUR:
The applicant, Hongjie Ma, applied pursuant to s 42 of the Proceeds of Crime Act 2002 (Cth) (the ‘Act’) to revoke a restraining order made under s 19 of the Act over a property that she solely owns at 47621 Avalon Heights Terrace, Fremont, California, USA (the ‘California property’).
For the reasons that follow the application is refused.
In 2012, the US Internal Revenue Service suspected the applicant’s husband, Dan Bai Shun Jin (Jin) of money laundering. Jin is a dual Australian/Chinese citizen who married Hongjie Ma, who resides in China, in July 2010. The US IRS and the Australian Federal Police (AFP), according to the informant,[1] suspect that Jin is likely to be involved in large scale illegal casino based money laundering activity in Australia, the US, Macau and Singapore.
[1]Federal Agent Georgia Prior, affidavit sworn 31 October 2013 in support of AFP application for a restraining order.
When in October 2013 the Commissioner of the AFP served notice of an application pursuant to s 19 of the Act for the restraint of the California property (and a number of other properties linked to Jin), neither Hongjie Ma nor Jin had been charged with a criminal offence, which remains the case. On 1 November 2013, Emerton J made an ex parte interim restraining order and on 22 November 2013, Sloss J made a restraining order until further order. It follows that the court was then satisfied that the authorised AFP Agent, Georgia Prior, held, on reasonable grounds, a suspicion that four properties, one of which was the California property, were each the proceeds of an indictable offence and that each was an instrument of a ‘serious offence’.
Since that order, Hongjie Ma and Jin have each filed affidavits challenging the basis for Federal Agent Prior’s suspicions and explaining how the California property was acquired.
The California property was jointly purchased by Hongjie Ma and Jin in September 2009 as an investment.
An Austrac Threshold Transaction Report dated 21 September 2009 evidenced an international funds transfer of AU$1,320,000 from Jin at Crown Casino in Melbourne to a Bank of America account jointly held by himself and Hongjie Ma. IRS enquiries confirmed that these funds were contributed to the purchase of the California property free of encumbrances for US$1,700,000. The AFP contended that the Bank of America funds applied to purchase the California property were proceeds of crime, derived from Jin’s suspect gambling activities.
Almost immediately after the purchase, Hongjie Ma became the sole proprietor of the property under an agreement with Jin. Hongjie Ma deposed that, on condition that the property was transferred into her sole name, she borrowed money on mortgage security that she on-lent to Jin to support his gambling. Inter-spousal transfer took place on 23 September 2009 and HSBC Mortgage Corporation (USA) advanced a mortgage loan of US$1,000,000 in February 2010. Hongjie Ma then transferred US$800,000 to her husband.
The California property, as mortgaged, remains solely in the name of Hongjie Ma as her only asset in the USA.
Section 42(5) of the Act relevantly provides that a court may revoke a restraining order if satisfied that:
(a) there are no grounds on which to make the order at the time of considering the application to revoke the order; or
(b) it is otherwise in the interests of justice to do so.
A heavy onus rests on the applicant. In Sunshine World Holdings, Greg James J explained the applicable test:[2]
Since, under s 19, the court must make the order if the statutory conditions are met, I would state the test this way: it is not open to me to revoke the order under s 42 unless the applicant affirmatively satisfies me that there are no grounds at the time of this consideration of the application to revoke, on which the restraining order would be made if now sought.
The grounds of which s 42 speaks are those which would found such an order, that is, the reasonable grounds for suspicion that the property is the proceeds of an indictable offence reasonably suspected of being committed in the 6 years preceding the application.
[2]Re Director of Public Prosecutions (Cth); Section 19 of the Proceeds of Crime Act 2002 (Cth); Re Sunshine World Holdings Ltd and South East Group Ltd (2005) 62 NSWLR 400, [53]-[54] (emphasis in original).
No other grounds are sufficient for making an order. Revocation pursuant to s 42 is not a de facto exclusion application and relief is limited to the situations described in the section.
The initial application was made pursuant to s 19 of the Act, which attaches to property, rather than to a particular ‘suspect’. The relevant test in sub-section 19(1)(d) is:
(d) there are reasonable grounds to suspect that the property is:
(i)the proceeds of terrorism offence or any other indictable offence, a foreign indictable offence or an indictable offence of Commonwealth concern (whether or not the identity of the person who committed the offence is known); or
(ii)an instrument of a serious offence;…
Section 19(4) provides that the reasonable grounds referred to in paragraph 1(d) need not be based on a finding as to the commission of a particular offence. However, in this case the AFP identified a particular offence, namely dealing with property reasonably suspected of being proceeds of crime, contrary to s 400.1(1) of the Criminal Code Act 1995 (Cth).
Hongjie Ma challenged Federal Agent Prior’s assertion that the funds used to purchase the California property were suspected of being the proceeds of crime which, in turn, tainted that property. She submitted that there was:
(a) no evidentiary basis disclosed in Federal Agent Prior’s affidavits to reasonably suspect that the funds used to purchase the California property were the proceeds of crime either under the Act or the Code; and
(b) no allegation or suspicion of a predicate offence, such as fraud or drug trafficking, as required pursuant to s 400.9 of the Code, that caused the funds used to purchase the California property to be proceeds of crime.
Hongjie Ma submitted that the only reference to any activity that could provide any basis for the required suspicion under s 19 was to unspecified ‘intelligence’ obtained from the US Internal Revenue Service to the effect that Jin was likely to be involved in large scale casino-based money laundering activity. Federal Agent Prior gave no detail as to how Jin was involved in actually laundering money, nor suggested any possible predicate offence tainting the money transferred to Bank of America as proceeds of crime. Federal Agent Prior’s suspicion was based on, and could be no higher than, the suspicion communicated to the AFP by the IRS. Hongjie Ma submitted that a suspicion based upon a suspicion is not a suspicion held on reasonable grounds. Absent the IRS suspicion, all the information relied on by Federal Agent Prior relating to Jin’s activities was consistent with him simply being a serious, long term and high profile gambler.
Hongjie Ma contrasted her circumstances with other cases where more specific information was relied on regarding the nature of prior illegal activity that was the precursor to alleged money laundering offences. Hongjie Ma submitted that Re Director of Public Prosecutions (Cth); Section 19 of the Proceeds of Crime Act 2002 (Cth); Re Sunshine World Holdings Ltd and South East Group Ltd[3] and DPP (Cth) v Tan[4] demonstrated that an applicant for a restraining order must by some positive assertion of fact in the affidavits show the nexus between a defendant’s prior wrongdoing and the suspected property. Hongjie Ma submitted Federal Agent Prior’s suspicions as to the California property in this case were nothing more than ‘mere idle wandering’ on her part.
[3][2005] 215 ALR 369.
[4][2003] NSWSC 717.
Federal Agent Prior did refer to other matters that supported her suspicions, including Jin’s use of several passports, the fact that he has never filed an Australian tax return and his failure on one occasion to declare the correct amount of money he was carrying in transit through Melbourne Airport. Hongjie Ma submitted that such matters, whether individually or in combination, failed to provide a reasonable basis for a suspicion.
Hongjie Ma submitted, that there was nothing remarkable about a man with Jin’s legally derived annual income purchasing outright a property valued at approximately US$1 million, albeit that the purchase was some years ago now. Jin deposed that he earned, in China, a base salary of about US$300,000 per year, plus cash bonuses every six months totalling approximately US$200,000, plus shares to the value of approximately US$100,000 per annum. No suspicion could reasonably arise from the apparent discrepancy between Jin’s legally derived income and the figures suggested by Federal Agent Prior as the quantum of Jin’s gambling habits, because the net amount of the latter figure was not relevant.
Hongjie Ma submitted that Federal Agent Prior’s stated suspicion was infected by an error in relation to an apparent inter-casino transfer of SNG$6,300,000 on 24 September 2011 from Jin’s Melbourne Crown Casino account to the Crown Casino in Macau, which was not recorded on Austrac. This was in fact an inward transfer to Jin’s Melbourne Crown Casino account from Singapore, as later acknowledged. This misunderstanding affected the central suspicion that Jin operated large scale casino based money laundering, and significantly diminished any basis for a suspicion regarding the source of funds for the California property.
Hongjie Ma also alternatively submitted that the restraining order should be revoked as it was in the interests of justice to do so pursuant to s 42(5)(b) of the Act on the basis that there was no evidence to suggest that the applicant knew, believed, or suspected anything untoward about the purchase and ultimate transfer to her of the California property.
The AFP submitted that from both the ambit and wording of both sections 19 and 49 of the Act (regarding restraint and forfeiture of property respectively) the identification of a relevant offence is not a precondition to the making of a restraining order. Hongjie Ma’s contention that there is no allegation as to what crime was the source of the restrained funds, was misconceived. That said, the AFP submitted that an offence was identified, being dealing with property reasonably suspected of being proceeds of crime.
The AFP submitted that Hongjie Ma failed to clear the high bar facing an applicant for the relief she seeks. As Shaw J said in DPP (Cth) v Tan: [5]
This is a tough test for the applicant to meet. It seems to me to mean there must be literally no grounds for the foundation of the order for it to be revoked. I leave open the question of whether irrational, improper or unlikely grounds for suspicion are sufficient to sustain an order.
[5][2003] NSWSC 717, [14].
The evidence of Federal Agent Prior explains the basis for her suspicions, which the AFP submitted arose reasonably from the following matters:
(a) The magnitude of apparent[6] discrepancies between the large sums of money evidently involved in Jin’ gambling and his known income sources;
(b) Jin’s gambling appeared to be astronomical. One Ms Fielding, the Crown Casino Compliance Manager, deposed that his total turnover at that casino between 2005 and 2013, which includes the relevant period, was approximately $850 million;
(c) The fact that Jin, who is a dual Australian/Chinese citizen has had, and has used, multiple identity documents, including six Australian passports.
[6]It was not necessary to be precise.
Federal Agent Prior relied on further matters arising subsequent to the initial application. Although Jin has stated that he earns a base salary in China of approximately US$300,000 with bonuses and shares, Hongjie Ma provided no evidence in support of such employment or income. Although Jin claimed that the figures provided by Federal Agent Prior about funds gambled were incorrect, he admitted to very high stakes gambling and being involved in moving millions of dollars. For example:
(a) A transfer from Singapore to Crown Casino in Melbourne in the sum of SNG$6,300,000 for gambling;
(b) Winning AU$17 million at Crown Casino;
(c) Losing US$6 million at the Venetian Casino in Las Vegas; and
(d) Borrowing $800,000 from Hongjie Ma for gambling.
The evidence of Hongjie Ma and her witnesses all supported the fact that Jin is a big gambler, but no comment was made or explanation given as to how he is able to fund his very high stakes gambling.
Federal Agent Prior acknowledged an error in her initial affidavit regarding the transfer of SNG$6,300,000 on 24 September 2011, however she later stated that the significance of this transfer as a basis for her suspicion had not diminished. The significance of this inter-casino transfer was its amount and that it had not been recorded by Austrac.
Hongjie Ma’s application fails for the following reasons.
The California property will be the proceeds of crime under the Act if it is directly or indirectly derived or realised from the commission of the suspected offence.[7] Pursuant to s 400.1(1) of the Criminal Code Act 1995 (Cth) a piece of property will be proceeds of crime if derived or realised, whether directly or indirectly, from the commission of an offence against a law of the Commonwealth, State, Territory or foreign country. The relevant offence identified in this case was an offence contrary to s 400.9(1) of the Code, which provides as follows:
[7]Section 329(1) of the Act.
Dealing with property reasonably suspected of being proceeds of crime etc.
(1) A person commits an offence if:
(a)the person deals with money or other property; and
(b)it is reasonable to suspect that the money or property is proceeds of crime; and
(c)at the time of the dealing, the value of the money and other property is $100,000 or more.
Penalty: Imprisonment for 3 years, or 180 penalty units, or both.
It was not in issue that the applicant had dealt with money or other property, nor that its value exceeded $100,000. The dispute between the parties arose as to whether it was reasonable to suspect that the California property was the proceeds of crime.
Hongjie Ma acknowledged that no direct evidence need be presented that a crime had been committed and that a reasonable suspicion may be based upon technically inadmissible material. I do not accept Hongjie Ma’s central submission that there was a need for Federal Agent Prior, as part of her grounds for suspicion, to identify a predicate offence that made the funds used to purchase the California property derived from proceeds of crime. It is not necessary for the authorised officer to have identified particular criminal activity that led to a need to engage in money laundering. The requirement is that there must be a suspicion on behalf of the authorised officer, reasonably held, that the property in question is proceeds of crime. I will later explain how the suspicion of money laundering is reasonably based without suspicion of specific laundering transactions.
I do not accept Hongjie Ma’s submission that the funds comprising the California property purchase price can be isolated from other information that grounded Federal Agent Prior’s suspicions. Jin has not been charged with any offence but the investigation remains ongoing. It is not in dispute that the California property was purchased with funds transferred from Crown Casino and thus linked to suspect gambling activities. It is irrelevant that it may be unremarkable for a person with an annual base income of US$300,000 to purchase a property worth US$1 million.
The power to revoke under s 42(5) is only to be exercised where there are ‘literally no grounds for the foundation of the order.’[8] Accordingly, if the respondent is able to show any reasonable ground for Federal Agent Prior’s relevant suspicions the application must fail.
[8]DPP (Cth) v Tan [2003] NSWSC 717, [14].
The words ‘reasonable suspicion’ in s 19 do not require proof or admissible evidence. I would adopt, with respect, the analysis of Allanson J in Re Application Pursuant to Section 19 of Proceeds of Crime Act 2002 (Cth); Ex parte Commissioner of the Australian Federal Police.[9]
[9][2014] WASC 390, [19]-[21] (citations omitted).
Whether a person has reasonable grounds to suspect something is to be judged on the facts known to that person at the time. The concept of reasonable suspicion is well known in the law. In George v Rockett, the High Court approved the definition of 'suspicion' given by Lord Devlin in Hussien v Chong Fook Kam:
in its ordinary meaning [suspicion] is a state of conjecture or surmise where proof is lacking: 'I suspect but I cannot prove'.
The court referred also to the comments of Kitto J in Queensland Bacon Pty Ltd v Rees:
A suspicion that something exists is more than a mere idle wondering whether it exists or not; it is a positive feeling of actual apprehension or mistrust, amounting to 'a slight opinion, but without sufficient evidence', as Chambers' Dictionary expresses it. Consequently, a reason to suspect that a fact exists is more than a reason to consider or look into the possibility of its existence.
For there to be reasonable grounds to suspect there must be material which is sufficient to induce the state of suspicion in a reasonable person. It is not, however, necessary that the material which establishes the reasonable grounds for suspicion be limited to admissible evidence: Walsh v Loughnan (Vincent J); Director of Public Prosecutions (SA) v Tregenza.
The purpose of the Act and the context of the statutory scheme also assist in understanding the scope of the reasonable suspicion test. A restraining order preserves the status quo while other investigations using the machinery of the Act are able to take place. The ultimate source of money on transactions being investigated as a suspected money laundering will usually be unknown and it will be precisely the point that there is no apparent explanation for the suspect transactions that precipitates the investigation.
The cases relied upon by Hongjie Ma - where the affidavit of the authorised officer appears to have been more specific regarding the nature of prior illegal activity which was the precursor to alleged money laundering offences[10] - do not establish a positive requirement for any particular level of specificity in the material supporting the authorised officer’s suspicion. Each application must be judged on its particular circumstances by the application of the identified test.
[10]Re Director of Public Prosecutions (Cth); Section 19 of the Proceeds of Crime Act 2002 (Cth); Re Sunshine World Holdings Ltd and South East Group Ltd [2005] 215 ALR 369; DPP (Cth) v Tan [2003] NSWSC 717.
I am satisfied that the evidence on this application presently does establish reasonable grounds for Federal Agent Prior’s continuing suspicions. I have considered all of that evidence and refer below to some of the highlights that support her suspicions.
Federal Agent Prior’s suspicions are not properly classified as suspicions based on suspicions. Although originally the source of her suspicions around Jin’s gambling activities was the initial referral that was based on US intelligence, a referral from another agency coupled with an understanding of the other agency’s methods is a reasonable starting point for a suspicion.[11] Investigations, and subsequently the affidavits filed for Hongjie Ma’s application, show that Jin gambles huge sums of money that cannot be reconciled with his known legally obtained income. He is person who has held multiple identity documents. Those matters can support a suspicion that Jin uses funds supplied by others to gamble and the multiple passports can mask who is controlling the funds that he gambles with.
[11]Application Pursuant to Section 19 of Proceeds of Crime Act 2002 (Cth); Ex parte Commissioner of Australian Federal Police [2014] WASC 390 ,[22].
Federal Agent Prior’s grounds for her suspicion extend beyond the California property and encompassed each property connected with the AFP investigations into Jin’s affairs, including properties owned by his former spouse. Federal Agent Prior identified as grounds for her suspicions the matters set out above, particularly the alleged discrepancies between Jin’s income, and the level of his gambling, Jin’s buy-ins, cash-outs and transfers to and from deposit accounts at Casinos, and his movement of funds out of Australia.
There was a controversy between the parties about the evidence of Ms Fielding, the Crown Casino Compliance Manager. Hongjie Ma submitted that Ms Fielding’s evidence of ‘buy-in’ of betting chips (cash and chip purchase vouchers tendered by a player at a gaming table) and turnover (cumulative total of all bets made) was wrong, overstated by double counting occurring when Jin cashed out his chips and then purchased further chips, it being assumed the same funds were used. For example, on day one, a gambler buys in $10M of chips and when he finishes for the day he cashes out $6M of chips. Then on day two, the gambler buys in $6M of chips. Hongjie Ma’s submission necessarily invited the assumption that the buy-in on day two used the funds cashed out on day one resulting in a double count of $6M. That assumption, which was merely Jin’s assertion, disguises the suspicion of money laundering.
Federal Agent Prior based her suspicions on the fact (confirmed by Crown Casino’s records) that since January 2010 Jin’s total buy-ins at Crown Casino were AU$141,192,115. This figure did not include Jin’s deposit account with Crown that he used by transfers both in and out, which are reported by Crown to Austrac. Jin’s total turnover between 2005 and 2013 was AU$855,844,299. Money laundering is suspected in circumstances where a person with access to multiple identities engages in large buy-ins and cash-outs of chips on a regular basis. Such conduct creates a huge turnover figure, but on each occasion of a buy-in and cash-out, that money can actually be exchanged with other sources of money, permitting laundering. The cash being used for buy-in may be tainted, while the cash obtained on a cash-out creates an apparently legitimate source for money. In the example given in the preceding paragraph, the gambler may have provided a casino cheque for $6M to an associate and received $6M in other funds to continue gambling the following day.
I am satisfied that there is a proper basis of reasoning in Federal Agent Prior’s suspicions. It is not necessary that I share her suspicion. All that is required is that the court be able to understand the authorised officer’s reasoning. In this context in the circumstances disclosed in the affidavits read on the application, I see no reason to doubt that Federal Agent Prior’s suspicions have been reasonably formed.
I am also not persuaded that it is otherwise in the interests of justice to revoke the restraining order. The applicant asserted that there was no evidence to suggest that she knew, believed or suspected anything untoward about the purchase and ultimate transfer to her of the California property. Even if I accepted that proposition, and I am not minded to do so, in the present circumstances the applicant has not done enough to dispel the apparently reasonable nature of the authorised officer’s suspicion that the funds used to purchase the California property were connected with money laundering.
Conclusion
Hongjie Ma has failed to satisfy me that there is no ground upon which to make a restraining order in this case on the material presently before the court. Her application will be dismissed. I will hear from the parties as to costs.
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