A wealthy property developer entangled in the Australian Taxation Office fraud sting is accused of playing a key role in an international cocaine syndicate smashed in Serbia on Tuesday.

Tristan Edward Waters, 34, Rohan Arnold, 44, and David Campbell, 48, were arrested in the five-star Metropol Palas Hotel in Belgrade on Tuesday after a nine-month investigation into what Serbian media labelled the "Waters' cartel".

Authorities pounced as the trio were allegedly in the middle of handing over a bag containing a pistol, $11,350 in Australian cash, €638,020 ($976,400) as well as large amounts of Czech crowns, Vietnamese dong, Japanese yen, Chinese yuan, Thai baht, Singapore dollars and Serbian dinars.

After intercepting a 1280-kilogram shipment of cocaine hidden in steel on a Chinese container boat in Sydney last April, Australian authorities sent a request to Serbia in November alerting them to the possible future meeting in Belgrade, Serbian state media reported.