The last 5 years have seen several innocent people pursued by the Australian Federal Police under the Proceeds of Crime Act 2002 (Cth) (POCA). The Courts have had to determine whether the innocent owners can keep their property, or whether that property must as a matter of law be forfeited to the Commonwealth, notwithstanding that the person has not committed any offence themselves.
Most of these cases have involved people who are uncontroversially victims of the money laundering methodology commonly known as cuckoo smurfing. Cuckoo smurfing is a type of ‘structuring’. In a nutshell a legitimate international remittance or transfer is hijacked by a dubious alternative remitter. Click here for a full explanation of this money laundering method.
Until last week only 2 cuckoo smurfing victims had ever been successful. Kalimuthu1, for whom I was trial counsel, was the first successful case. The only other successful case (until recently) was Fernandez. 2 Each of those cases, although successful at first instance, were overturned on respective appeals by the Commissioner of the AFP. Kalimuthu, together with Lordianto, went on to the High Court, where I appeared with Mr Hament Dhanji SC for Kalimuthu. For more on the High Court’s decision see my earlier blog post.
The rest of this post assumes the reader is familiar with the blog posts contained in the above links.
Gwe v Commissioner of the AFP
On Friday 2 October 2020 the NSW Court of Appeal upheld (in a 3:0 decision) an appeal by my clients (who were Indonesian citizens who used alternative remittance to transfer money to Australia for their intended retirement here).
The appellants had been unsuccessful at trial (which occurred prior to the High Court hearing Lordianto and Kalimuthu). Their appeal was delayed whilst we waited for Lordianto and Kalimuthu to be decided.
I argued the Gwe appeal together with Mr Bret Walker SC in August 2020. That appeal, published as Gwe v Commissioner of the AFP  NSWCA 247, is only the third time a cuckoo smurfing victim has been successful. It is the first time a cuckoo smurfing victim has been successful at the appellate level.
The leading decision was written by President Bell. Chief Justice Bathurst and Justice Emmett agreed with the President’s reasons and his orders.
At one level Gwe turns on its own procedural history. Oddly the Commissioner of the AFP flagged an intention to cross examine at trial, and then on the eve of trial abandoned that course. As such the appellants’ evidence stood uncontradicted and uncontroverted. Another particular feature of the case was that the Court criticised the trial judge’s use of an exercise in speculation about what Ms Hoang might have discovered in certain counterfactual scenarios that bore no relationshipto the evidence. 3
However, on a deeper analysis I suggest Gwe contains some useful insight for future cases.
The feature that distinguishes Gwe from Lordianto, Kalimuthu and other cases like it is the evidence that the appellants gave. It was that neither of them knew the details of the transactions on their Australian bank accounts.
Ms Hoang was the appellant that dealt with banking. She could not read English but was able to log into the home screen of their internet banking facility with Westpac. She only looked at the balance displayed on the internet banking home screen. She did not review the hard copy bank statements that she received which, like the internet banking, was in English 4. The NSW Court of Appeal summarised Ms Hoang’s evidence 5 in these terms:
The thrust of Ms Hoang’s evidence, both in the s 180 examination and in her affidavit before the primary judge, was that she did not look at any individual transactions disclosed on her hard copy Westpac Choice bank statements or available on the Westpac internet banking platform to which she had electronic access.
The only available conclusion, we argued 6, was that:
… without granular knowledge of multiple individual deposits into that account in sums of less than $10,000, there was nothing that Ms Hoang had actual knowledge of that would have aroused any suspicion in her mind (or that of a reasonable person with her knowledge) as to the use of the bank account in a way that contravened s 142 of the AML Act (ie in a way that amounted to criminal structuring)
The decision in the Court of Appeal
The Court suggested the AFP’s decision not to cross-examine Ms Hoang could be described as a gamble that was lost. 10
The consequence of Ms Hoang’s evidence being accepted was that the Court concluded she was not aware of the structured nature of the payments. 11 The Court added, in response to submissions the AFP ran on appeal about further evidence that Ms Hoang might have given but didn’t: There is only so far that one can go in proving a negative.
It had not been suggested there were any other matters that might have aroused a suspicion in a reasonable person with Ms Hoang’s knowledge. As such the Appellants had discharged the onus 12 that they were required to by ss 29 and 330(4)(a). 13 The appellants were therefore entitled to have their property excluded from the restraining order.
Emmett AJA published some very short reasons concurring 14 with President Bell. He said at  that:
… the circumstances [that might arouse suspicion that s330(4)(a) refers to] … must be limited to facts that are actually known to a person applying for an order pursuant to ss 29 and 31.
The Court will now determine costs, and whether the AFP should pay the appellants’ costs on a full indemnity basis pursuant to s323 of the Act. 15 The question of what damages the AFP should pay the appellants has been sent back to the Common Law Division to be determined by a single judge.
Useful guidance for future cases
Presumably the AFP will not take the same gamble again. In future any applicant for an exclusion order who says ‘I did not look beyond my account balance’ should expect to be vigorously challenged on that evidence.
Nevertheless, if that is an applicant’s evidence, there remains the prospect that the Court will accept the evidence. If the Court accepts similar challenged evidence in a future case, the outcome is likely to be the same as that in Gwe.
Facts actually known to the person
Ultimately Gwe confirms that the Proceeds of Crime Act (and s330(4)(a) in particular) is concerned with whether a reasonable suspicion would be aroused based on the facts actually known to the person (ie the applicant for exclusion). The Court approved the following submission made by Mr Walker:
…the law is not constructive knowledge. To put it another way, one can’t approach the notion of ‘knowing what she knew’, to adapt a quotation from the Victorian Court of Appeal [in Le] approved by the High Court, one can’t treat that as meaning or incorporating or including knowing what she didn’t know but could know had she done something she didn’t do. 16
As the Court itself expressed the position:
The significance of these [earlier case authorities] for present purposes is that an assessment of whether or not, for the purposes of s 330(4)(a) of the Act, property is acquired by a third party in “circumstances that would not arouse a reasonable suspicion that the property was proceeds of an offence”, whilst to be made objectively, must nevertheless be undertaken in light of the actual knowledge of the party seeking the exclusion order. Thus, if a person with the applicant’s knowledge (“knowing what she knew” in the passage from Le at ) would not have had a reasonable suspicion, then this element of s 330(4)(a) will be satisfied. 17
How much knowledge is too much?
Although not part of the central reasoning (ratio decidendi) of the case the Court also made this interesting comment at : it is not apparent why the fact that the bank account was increasing by increments of $27,000 would put its holder on notice of a series of individual payments of $9,000 each. This remark was made in dealing with the primary judge’s counterfactual assumption (not the facts of Gwe’s case). The remark may support an applicant for exclusion who expects to receive $100,000 by way of remittance, and notices from the increase in daily balances, that the deposit arrived in 2 or 3 tranches over 2 or 3 days (but never sees individual deposits of less than $10,000).
The significance of deposits of under $10,000 is unlikely to be known to many people, particularly those outside of Australia. The fact that a person is ignorant of Australian banking law appears to be beside the point.Footnotes
-  WASC 108
-  NSWSC 1197
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- See s317
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