Bags of cash: how money launderers used Commonwealth Bank of Australia

SYDNEY (Reuters) - In a run-down mall in one of Sydney's biggest Chinese neighborhoods in 2015, 29-year-old Jizhang Lu showed up at the top-floor offices of a meat export company carrying a carrier bag stuffed with hundreds of thousands of dollars in cash.

According to police documents filed in court and reviewed by Reuters, Lu said he made the trip to the shopfront of CC&B International Pty Ltd eight times over three weeks. Each time a CC&B employee would hand him a receipt showing a different company had bought tens of thousands of kilograms of meat.

The cash - as much as A$530,200 ($416,840) at a time - was then deposited at a Commonwealth Bank of Australia (CBA) branch, according to the police statement of facts agreed by Lu.

But the apparent purchases were fake, and last year Lu was jailed for two years after pleading guilty to helping launder A$3.2 million of what police allege were proceeds from an unidentified international drug syndicate.

The court records reviewed by Reuters did not name Lu's lawyer. Lu could not immediately be contacted directly because he was in custody.

The police case against Lu is now one of several being cited by financial intelligence agency AUSTRAC in its statement of claim against CBA, the largest civil court action of its kind in Australian corporate history.

AUSTRAC has accused CBA of "serious and systemic" breaches of money-laundering and counter-terrorism financing rules, alleging the country's second biggest mortgage lender failed to detect suspicious transactions nearly 54,000 times. It faces fines potentially amounting to billions of dollars.

CBA has said it will fight the AUSTRAC lawsuit, saying it would never deliberately undertake action that enables any form of crime. CBA said a coding error with new automated teller machines was behind most of the breaches but that it recognized there were "other serious allegations" in AUSTRAC's claim were unrelated to that software problem. It declined to comment specifically about the police case against Lu.

PROCEEDS OF CRIME

AUSTRAC's lawsuit against CBA asserts that, in total, A$17.7 million was deposited at the bank from February to August 2015 on behalf of a company identified in the earlier criminal case as CC&B.

"These funds were the proceeds of a drug importation syndicate and were proceeds of crime, within the meaning of the Criminal Code Act," AUSTRAC's statement of claim says, referring to CC&B only as Company 1.

Lu was identified in AUSTRAC's statement of claim against CBA, which also specified the time and length of Lu's sentence. A subsequent Reuters search of the criminal case against Lu produced the police "facts sheet" which provided further detail of his operation, including the name of CC&B.

The records of Lu's criminal case, provided to Reuters by a communications officer for the court which convicted Lu, showed that he pleaded guilty.

A call to the phone number listed on CC&B's website went unanswered. A Reuters visit to the address where Lu said he dropped off bags of money, at Lemon Grove shopping center, showed no sign of CC&B - other than a mention in an old store guide for shoppers.

Calls over two days to Lemon Grove also went unanswered.

Australian company filings showed CC&B's corporate address as "Sunnyside Accountants". A woman who answered the phone at that firm said CC&B was a former client but that she could give no further information because the organizations had parted ways. Sunnyside hasn't been named in AUSTRAC's suit.

"CAN YOU HELP?"

Lu, a Chinese national on a business visa, described himself as a "net engineer", according to the police document filed in court. He had no involvement in the meat export industry and earned 60,000 yuan ($9,000) a year in his home country, he told police.

Lu said he met another Chinese man while grocery shopping in the Sydney suburb of Chatswood, where CC&B was based.

"After some chatting, he say, 'can you help me do this please?'," Lu told police, according to the document.

Lu agreed to help "because the man asked him", the police statement said, without elaborating.

He told police he didn't understand the receipts because they were written in English.

Australia's Joint Organised Crime Group charged two CC&B employees with dealing in criminal proceeds about the same time as Lu, in August 2015.

The Australian Federal Police could not immediately provide an update on the two CC&B employees identified as being charged.

The police statement said a third CC&B person, company director Ka Chun Leung, was a "potential co-accused" but has left the country. Efforts by Reuters to contact Ka were unsuccessful.

For a graphic on accusations against CBA, http://tmsnrt.rs/2w03qvi

(Editing by Lincoln Feast)