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On money-laundering, ABC double standards and Sudanese welfare recipient's $1.5M house

This story published by their ABC raises some questions beyond that posed in the ABC's opening paragraph:

How did then 22-year-old Ngouth Oth Mai manage to buy a $1.5 million property in Melbourne upfront in 2014 when he had only ever earned welfare payments and lived in housing commission?

The ABC quotes John Chevis, who spent 12 years working on fraud and corruption cases for the AFP and is now an adviser on money laundering for the United Nations.

"The real estate agents involved in the sale of the house in Australia should have conducted their own due diligence on the source of the funds".

There's plenty more in the ABC's story about the source of funds and money-laundering.

And that leads me to ask why isn't the same standard being applied to Slater and Gordon and its continued misstatement of the source of funds used by Gillard and Wilson in the purchase of Kerr Street?

Here's the ABC

That is the question he must now answer in the County Court of Victoria, where the AFP launched civil action under the Proceeds of Crime Act (but not criminal charges).

Ngouth Oth Mai is the son of James Hoth Mai, the former chief of staff to Sudan's People's Liberation Army (SPLA), who was sacked in 2014.

According to The Sentry, an anti-corruption watchdog set up by actor George Clooney and activist John Prendergast, military generals in South Sudan earn up to $65,000 a year and the wealth amassed by some of them and their families is unexplained.

The Mai family was on The Sentry's list.

They discovered the luxury house in Narre Warren while investigating corruption in South Sudan for a report published in 2016, War Crimes Shouldn't Pay.

This prompted the Australian Federal Police (AFP) to start an investigation.

The ABC has seen the affidavit that outlines the AFP's case.

Red flags

According to the document, an initial deposit of $155,171 was wired from a bank account belonging to Hoid Establishments, a development company in Uganda, directly into the trust account registered to the Melbourne-based real estate agent that handled the sale in June 2014.

John Chevis, who spent 12 years working on fraud and corruption cases for the AFP and is now an adviser on money laundering for the United Nations, said the transaction should have been the first red flag.

"The real estate agents involved in the sale of the house in Australia should have conducted their own due diligence on the source of the funds, although Australia's anti-money laundering laws do not currently require it," he said.

The AFP investigator claims the balance of the million-dollar property and a luxury car was paid by money that was transferred from Africa into National Australia Bank (NAB) business accounts held by a luxury car business registered in Nguoth Oth Mai's name.

The NAB said in a statement that it conducts checks and due diligence on all customers.

However this case raises serious questions around its banking process.

"They should possibly have noticed that the funds travelled a circuitous route for which there is no apparent commercial reason," Mr Chevis said.

"Having identified these transactions as unusual, the banks should then have sought further information on the source of the funds and then, assuming they identified the source as illegitimate, rejected the transactions."

Where did the money come from?

That circuitous route is revealed in the AFP's affidavit.

More than $1.5 million was transferred in five instalments from companies located in Uganda and Kenya, sometimes going through banks in Dubai, into the NAB business account registered to a luxury car business — Sportscars Dealers — a company where the former general's son, Nguoth Oth Mai, was both director and majority shareholder.

The AFP stated the company did not trade any vehicles.

The police allege the unexplained payments came from companies owned by two businessmen, Humphrey Kariuki and Idro Taban, both known to the anti-corruption watchdog, The Sentry.

"Records show that firms owned by these businessmen received contracts from the SPLA [Sudan's People's Liberation Army] during Hoth Mai's tenure as chief of staff, including Belgravia Services Ltd, Dalbit Petroleum and LOID Investment," The Sentry said in a statement.

"LOID Investment was listed as the 'notifying party' for a weapons shipment and that Dalbit Petroleum had wired hundreds of thousands of dollars into the personal bank accounts of two South Sudanese generals in 2014.

"Like Hoth Mai, one of those generals also used the funds for the purchase of a home outside South Sudan."

Centrelink benefits and tax evasion

The AFP produced Australian Taxation Office records in the affidavit to show some members of Hoth Mai's family, who reside in Australia, have not declared any income since 2009.

It said Nguoth Oth Mai also did not declare the property purchased through his company's bank accounts and alleged that he evaded tax as a result.

The affidavit also explained some of the family members were on Centrelink benefits and lived in housing commission until the million-dollar property was purchased in 2014.

The court document contains an allegation that the luxury car business was set up for the sole purpose of moving money from overseas into Australia to purchase the property without alerting Centrelink.

The AFP claimed the welfare payments could have stopped if the $1.5 million was deposited into personal accounts.

The police investigator explained the money in the NAB accounts was also used to purchase an Audi vehicle for Nguoth Oth Mai's younger sister before the business was deregistered on 15 September 2016.

Bank statements show the initial deposit for the luxury car was paid by former military general James Hoth Mai, who held an account in his name with the Commonwealth Bank of Australia (CBA).

Why didn't the banks and AUSTRAC question the movement of money from Africa to Australia?

Who's looking out for money laundering?

Dr Mark Zirnsak, from the Uniting Church in Australia and secretariat for the Tax Justice Network, said the case has highlighted concerns with Australia's anti-money laundering processes when it comes to politically exposed people, or PEPs.

"It does raise serious concerns about the health of Australia's anti-money laundering system when it comes to people who are politically connected," he said.

"The fact that the general's son was able to use a company to buy a property without the bank being alerted to the fact that this was likely to be money that couldn't be explained as legitimately sourced — that's a real concern.

"It does also raise another issue around the regulator, AUSTRAC, that's supposed to look after our anti-money laundering system and the fact that they do not do any public reports to reassure the community that the banks and other financial entities are doing a good enough job to combat money laundering."

The Financial Action Task Force (FATF), an international body that sets global standards for combating money laundering, recommend banks perform due diligence on personal and business accounts that belong to anyone who does or has previously held a prominent public position in any foreign government, including high-ranking member of the armed forces, and their immediate family.

AUSTRAC is not in line with FATF's standards because it does not consider a person "politically exposed" after they leave office.

That can make it easier for proceeds of corruption to be laundered into Australia's economy and is one reason FATF delivered a scathing review of Australia's anti-money laundering processes in 2015.

"The banks, through which these funds moved, should have noticed that the source, and ultimate beneficiary of the funds, was linked to a former senior ranking member of the military in a country that is known to have issues with corruption," Mr Chevis said.

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services does not currently cover banking failures with respect to money laundering and there are suggestions that maybe it should.

"Engagement in high-risk and less-than-ethical behaviour uncovered so far in the royal commission is almost certainly also present with respect money laundering," Mr Chevis said.

Mr Chevis said financial intelligence units in the various countries through which these funds moved, including AUSTRAC, should have also been alerted to the suspicious transactions.

"They perhaps should have noticed that the source and beneficiary was linked to a PEP and that the funds were being moved in a manner that is a potential red-flag for money laundering," he said.

"AUSTRAC collects data on international funds transfers and could have, if it had active surveillance in place, independently identified that these transactions related to a PEP."

AUSTRAC said in a statement that it cannot comment on current operational matters.

Solicitor Leath Nicholson, who represents James Hoth Mai, also would not comment on the case, but said in a statement that his client is a person of impeccable character and the claims made by the AFP are without merit.

The case is scheduled to return to court in July.