Street drugs smuggled into Australia inside toys and nappies

The crime

The investigation started when law enforcement officers found 126g of crystal methamphetamine hidden in a stuffed toy in cargo coming into Australia from Hong Kong. Over 13 days authorities found more hidden drugs, including 535g of crystal methamphetamine in stuffed toys and the lining of nappies, and 7kg of pseudoephedrine hidden in cushions. Authorities arrested a man (Offender A), who allegedly directed the drug importing.

AUSTRAC intelligence helped to reveal how the syndicate paid for the drug importation through multiple international funds transfers to China. Our data showed that over one year syndicate members sent international funds transfer instructions (IFTIs) to China totalling more than A$137,000.

We had two SMRs in our database involving two syndicate members (syndicate members 1 and 2) making suspicious IFTIs to China. Our database also showed Offender A had sent 11 IFTIs there, totalling more than A$37,000.

Law enforcement officers searched two residences and seized more than A$14,000 cash, SIM cards, computers, documents, fake Chinese and Australian identification, stuffed toys with their contents removed and drug-related items. Offender A was arrested and charged with drug-related offences.

Penalties

Offender A was sentenced to six years and eight months in prison.

How industry reporting helped

Two SMRs were vital to the investigation.

A reporting entity submitted one of the SMRs after observing that, in one month, Syndicate Member 1 sent 15 IFTIs totalling more than A$67,000 to China. The reporting entity was suspicious because:

• all the outgoing IFTIs were paid for with cash in structured amounts below the A$10,000 cash reporting transaction threshold
• the IFTIs were sent to multiple beneficiary customers in a high-risk jurisdiction
• the volume and frequency of the funds transfers was higher than normal for an average customer.

The second SMR, from a bank, detailed how a customer (Syndicate Member 2) visited a branch to deposit cash and make two IFTIs totalling A$33,000 to China. The SMR noted the funds were sent to the same China-based beneficiary that an apparently unrelated customer had sent IFTIs to the previous day. Further investigation revealed that this unrelated customer was in fact Syndicate Member 1.

The bank identified that Syndicate Member 1 had visited the branch the day before and deposited A$9000 cash in amounts of A$1000 and A$8000. Syndicate Member 1 then withdrew A$8000 and ordered an IFTI for A$8000 to the common beneficiary customer in China.

The bank contacted Syndicate Member 1 who was evasive when asked about the reason for the funds transfer, and about his relationship to Syndicate Member 2.

The bank officers thought it was unusual that a total of A$41,000 had been transferred to the same beneficiary in China over two consecutive days by two different customers. This, along with Syndicate Member 1 being reluctant to explain or provide details about the transaction, and the bank's inability to determine the purpose of the funds transfers, prompted the bank to submit an SMR to AUSTRAC.

AUSTRAC’s role

As well as identifying Offender A and analysing the financial activities of the two syndicate members, AUSTRAC information helped to reveal the scale of the syndicate’s activity. Syndicate members were linked to approximately 400 outgoing IFTIs to China totalling A$3 million and 40 outgoing IFTIs to Hong Kong totalling A$400,000.