The account balance grew by nearly $290,000 in a month, mostly in structured deposits below $10,000, the threshold above which law enforcement agencies receive mandatory notifications. Mr Najmuddin has not tried to wrest the money back from authorities, saying court action was too expensive, but has denied any wrongdoing. The freezing and forfeiture applications to the NSW Supreme Court, based solely on the structured deposits, did not explore whether he was involved in the indictable offences. “I’ve given my explanation,” he told Fairfax Media. “My department wrote a letter to the AFP.” Mr Wan Ahmad Najmuddin, 59, has said he arranged for a close friend in Malaysia to transfer the money to pay for his daughter’s master’s degree.

Malaysian police cleared their officer in an internal inquiry after being alerted by the AFP. Senior AFP officers with Wan Ahmad Najmuddin bin Mohd on his appointment to the role of criminal investigations director in 2017. Credit:www.rmp.gov.my A spokeswoman for the AFP said it would not be appropriate to comment on the matter. But responding to questions about proceeds of crime forfeitures, the spokeswoman said the AFP considered whether account holders “should have had a reasonable suspicion that some criminality existed”. While a full account of Mr Wan Ahmad Najmuddin’s case has not been detailed, more and more criminal groups are exploiting international transactions outside the traditional banking system.

By hijacking legitimate transfers, syndicates replace clean money with dirty to both pay for crimes and wash profits. The AFP is grappling with legal uncertainty in about 10 such cases, with tens of millions of dollars at stake as appeals courts decide on access to criminal proceeds. In one case, lawyers for the agency warned the NSW Supreme Court it would be allowing a “loophole” for a “known money laundering methodology” if it refused the forfeiture request. Criminals 'walk free' But a former AFP lawyer has criticised the force for going after the unwitting recipients of criminal proceeds, while the criminals themselves "walk free".

As director of the criminal investigation department, Mr Wan Ahmad Najmuddin holds the rank of commissioner, bears the highest state title, Dato’ Sri, and tackles everything from illegal gambling and murder to insults against the Prime Minister, Najib Razak. At the time of the suspicious deposits into his account, he was head of police in Johor state, and a frequent traveller to Australia. Since 2001, he has visited nine times, always on a tourist visa, often for less than a week and, sometimes, with lots of cash. Across three trips in 2011 and 2012 he declared $112,000 to Australian customs. It was on one of the 2011 trips that he opened an account in his own name at the Commonwealth Bank’s Haymarket branch in Sydney's CBD. And in December the next year, one day after he arrived in Australia, $30,000 landed in the account (from deposits at Merrylands, Ryde, Strathfield and Burwood) while $8000 was withdrawn at Haymarket.

The cash he brought into Australia and the bank account were for Mr Wan Ahmad Najmuddin’s son’s aviation studies, according to the assistant director of the Royal Malaysian Police integrity department, Allaudeen Abdul Majid. A flurry of activity For several years, the account lay dormant. Then, six days after Mr Wan Ahmad Najmuddin’s final trip in September 2016, cash deposits from five different states began pouring in. Analysing the constellation of transactions - 54 of which fell below the reporting threshold - the Commonwealth Bank and the financial crime tracker AUSTRAC became alarmed.

“There does not appear to be any apparent lawful reason for the form and manner of the deposits,” an AFP officer from the Criminal Assets Confiscation Taskforce wrote in an affidavit. When the bank first told Mr Wan Ahmad Najmuddin it planned to close the account, a reply came from a hotmail email address asking for the balance to be sent as a cheque. Mr Allaudeen Abdul Majid of the integrity unit said Malaysian police had fully investigated the matter, finding the funds were lawfully obtained from the sale of a house. Investigators found the police chief had wanted to send money to his daughter, entrusting the transfer to his close friend, Seenisirajudeen Mohamad Basith, an Indian national who has since returned to India. 'The whole episode was an oversight'

“Unknown to Dato’ Sri Wan Ahmad Najmuddin Bin Mohd, the money was transferred without compliance to Australian laws,” the integrity officer wrote. “The whole episode was an oversight. No malice was intended to break any laws including Australia’s.” The AFP would not comment on the Malaysian investigation report sent last March, the week before it won a forfeiture order. The matter does not appear to have strained relations between the two police forces, which work together to fight international crime. Six months after the funds were seized, AFP liaison officers in Kuala Lumpur posed for photographs with Mr Wan Ahmad Najmuddin on his appointment to the role of criminal investigations director.

It is not known how his close Indian friend was said to have arranged for the hundreds of thousands of dollars to reach Australia. Hawala, 'flying money' and 'cuckoo smurfing' But criminal groups have long targeted alternative banking systems - known as hawala in Arabic or by the Chinese term for “flying money” - in ways that thwart tracking of criminal profits. In these transactions, remitters in different countries trust each other (they might be related, or in other businesses together) and rather than wiring money back and forth for clients, they simply keep a ledger. When an overseas remitter needs $100,000 deposited in Australia, his Australian partner arranges the payment from his own pool of funds, and vice versa.

It is often entirely legitimate. But it is also solves a problem for criminals who want to transfer money without specific sums being tracked. When a Sydney crime gang needs to pay affiliates in south-east Asia for a drug shipment, it can liaise with corrupted money remitters. A south-east Asian remitter accepts clean money from an honest local client, who wants it sent to Sydney, and gives it to the south-east Asian criminals instead. In Sydney, the honest client’s recipient still gets paid. But the money comes from the Sydney gang’s dirty cash, split into a series of smaller, less conspicuous bank deposits arranged by the second remitter. The technique is called “cuckoo smurfing”, from the cuckoo bird who tricks others to warm her eggs and the slang for splitting deposits.

“Cuckoo smurfing is the way of the future as more people learn about it,” said Todd Harland, a money laundering consultant and former AUSTRAC manager. “It keeps the money trail invisible.” In Australia, money remitters must be registered with AUSTRAC but the intelligence agency said alternative banking has been used to perpetrate tax fraud, drug trafficking, tobacco smuggling and people smuggling. And according to the NSW Crime Commission, the sector is growing in popularity among sophisticated crime groups.

“In some investigations, we have observed the movement of hundreds of millions of dollars that has never hit the formal banking system,” an analyst said. “Criminal groups needing to move large amounts of cash out of Australia have tapped into cultural and community systems ... resulting in innocent customers receiving cash they were expecting without any knowledge of its criminal origins.” An AFP spokeswoman said any requests to freeze or obtain proceeds of crime were “tested through a thorough court process” in which interested parties could explain themselves. “The AFP does consider the culpability of account holders” and has discontinued some cuckoo smurfing proceedings, she said. 'It punishes the wrong people'

But barrister Edward Greaves, a former deputy counsel for the AFP, has described the police approach as harsh and against the spirit of proceeds of crime laws. “It punishes the wrong people while the criminals walk free with their money,” Mr Greaves wrote on his website. Last year, he successfully fought an application by his old employer to seize $3 million, money sent by a Malaysian couple to Perth that was substituted with criminal funds. Mr Greaves argued the AFP was displaying an Anglo-Saxon bias, not wanting to look “beyond the white cliffs of Dover” to appreciate how popular alternative banking was in other countries. The AFP has appealed the decision and two others in NSW.

It lost its bid to seize $500,000 in the account of international student Rommy Fernandez, the son of a wealthy Indonesian businessman whose money was replaced by now-convicted criminals. Lawyers for the AFP had submitted “if the court refuses the forfeiture orders in the circumstances of [the defendant’s] case, it is allowing a ‘loop hole’ to remain open within the Australian financial system that would permit a known money laundering methodology". They went on: “It is not in the public interest to condone the use of money remitters who seek to operate outside the rules of the Australian financial system.” Justice Carolyn Simpson found Mr Fernandez’s account was at most an instrument of an offence, not the proceeds of crime, which gave her legal discretion to decide if forfeiting the funds was in the public interest. She noted the need to short circuit the protection of criminal profits.