Police 'chased low-level prosecutions rather than probe global drugs network involving triads'

Investigator says probe tracked billions of dollars of drug money the syndicate laundered through companies and financial institutions in Hong Kong and Macau

PUBLISHED : Sunday, 20 April, 2014, 5:27am
UPDATED : Tuesday, 22 April, 2014, 10:24am

An investigation that placed Hong Kong at the centre of a global drug-trafficking and money-laundering network was closed down because of a reluctance by police to pursue a long-term strategy in the battle against dirty money, according to two investigators who led the probe.

The Australian Crime Commission-led investigation - which began in 2007 and ended in 2011 - identified a transnational criminal organisation called the Ong Ngoai syndicate, in which senior triad figures in Hong Kong play a key role.

The probe - codenamed Operation Dayu - tracked billions of dollars of drug money the syndicate laundered through companies and financial institutions in Hong Kong and Macau, according to Michael Purchas, who led the investigation.

Purchas says the desire of police in Hong Kong and Australia for quick, "low-level'' prosecutions led to the eventual winding down of the investigation, which could have identified the kingpins of the multibillion-dollar drug trade in the Asia-Pacific region.

Hong Kong police have declined to comment on Operation Dayu. But criticism of their role comes amid growing concern over money laundering following the release of figures that revealed the number of reports of suspicious financial transactions in the city reached a 12-year high of 33,000 last year.

They also follow an economic crime survey by accounting firm PricewaterhouseCoopers (PwC) released in February that ranked Hong Kong and Macau as the worst places in Asia for money laundering.

According to the study, 37 per cent of companies in Hong Kong and Macau - mainly banks and casinos - had experienced money laundering in the past two years. That figure compares with the global average of 11 per cent.

"The concentration of financial services in Hong Kong and gaming in Macau drives the significance of money laundering in the local marketplace," said John Donker, the lead PwC partner for forensic services for the mainland and Hong Kong.

Last week, Purchas, a former investigator for Hong Kong's Independent Commission Against Corruption, told the Sunday Morning Post: "Just like [police] here in Australia, [Hong Kong police] wanted to have a six-month task force, prosecute six people for a few million dollars and crow about what a great job it was. All you will do is cut a finger off which will grow back in 24 hours. There is no point. All the assets you've spent years cultivating would be gone."

Rather than concentrating on individual arrests or drug seizures, he said Dayu focused on tracing illicit cash flows in order to identify key figures in the regional drugs trade.

The Australian Crime Commission was set up in 2003 to co-ordinate the country's efforts to tackle serious and organised crime.

It found that the secretive Ong Ngoai - Vietnamese for "grandfather'' - syndicate, composed of the top members of gangs across the region, was behind much of Asia's drug smuggling and is using Hong Kong and Macau as bases to launder drug money.

Intelligence analyst Patrick Vikingsson, who also played a key role in Operation Dayu, said: "Focusing law enforcement resources on individual drug busts, although necessary, is not very efficient and causes a mere inconvenience … you can literally take out tonnes of illicit drugs without having any impact on the structure.

"By taking a top-down approach and focusing on the money side of the joint venture, the picture changes quite dramatically.''

According to Purchas, Hong Kong police were initially reluctant to co-operate with the investigation and an agreement to set up a "sting" money-laundering operation - where the proceeds of the syndicate's drug trafficking would be cleaned and tracked - was not followed through on.

"We couldn't get the undertakings out of Hong Kong to keep the job covert with regards to what we were doing globally," said Purchas. "They made it clear from the outset that they would disclose the evidence in open court once they caught the perpetrators in Hong Kong."

Statistics from the Hong Kong Joint Financial Intelligence Unit show a more than 60 per cent decrease in the number of convictions for money laundering since 2010, falling from 360 to 140 last year.

"How could you ever think that Hong Kong - with the size of its economy, its peg to the US dollar and Macau on its doorstep - doesn't have a money-laundering problem?" said Purchas.

He said the Ong Ngoai used financial institutions and construction companies in the city to launder drug money earned elsewhere in the region.

"At the top of the syndicate are the top business people. It's no different from Jardine moving dope in the 19th century," said Purchas, referring to colonial merchant William Jardine's involvement in the opium trade. Law enforcement sources interviewed for this story declined to name the companies implicated in Operation Dayu for fear it would jeopardise ongoing investigations.

Comprised of 22 "seats" - or key bosses - around the globe, the Ong Ngoai operates by co-opting rather than confronting rival gangs and using bribery and blackmail to leverage assistance within law enforcement and political circles, Purchas said.

A syndicate affiliate had at one point infiltrated an Interpol conference in New York, attending the event as part of his formal duties as a senior police officer, according to the investigators involved in Operation Dayu.

Interpol did not reply to questions on the syndicate.

Its most senior members are affiliated with yakuza mobsters in Japan and Hong Kong's triads, which are now said to be co-operating rather than competing among themselves.

"The Ong Ngoai consists of members of the Sun Yee On [a leading Hong Kong triad], making the triad highly significant in terms of its influence in a global organised crime structure," said Vikingsson. "The linking up with other groups reduces the need to dominate a market or territory and therefore the risk of conflict which would otherwise attract law enforcement attention."

In February, a triad member associated with the group, Mark Ho Man-kong, lost his final court appeal in Hong Kong against extradition to Australia, where he is accused of smuggling methamphetamines with outlaw motorcycle gangs.

The syndicate is responsible for more than US$1.1 billion of drug imports into Australia alone, according to an Australian Federal Police spokesman.