Christine Jiaxin Lee received the extended overdraft four years ago, but failed to report the error to Westpac bank.

Instead the 21-year-old spent the money on handbags and other luxury goods, it is claimed.

The chemical engineering student was attempting to leave for her native Malaysia when she was stopped by police and arrested at Sydney Airport on Wednesday night.

She allegedly owes $3.3m to her bank. Lee appeared in court charged with dishonestly obtaining financial advantage by deception and knowingly dealing with the proceeds of crime.

It is alleged she failed to notify the bank that she was not entitled to the money.

Fraud experts began investigating in 2012, but a warrant for Lee’s arrest was only issued in March this year.

The court heard she knew police were attempting to make contact with her and she obtained an emergency Malaysian passport in order to leave the country.

However, Lee’s lawyer said she was simply going to visit her parents, who were unaware of her arrest in Australia.

Lee claimed to have obtained the emergency passport because she had lost her original.

Magistrate Lisa Stapleton, granting bail, told the court: ‘It’s not proceeds of crime. It’s money we all dream about.

The student allegedly spent the money on a luxury shopping spree “She didn’t take it from (the bank). They gave it to her”.

She added that if this is what happened, the student would owe the money she had spent but would not have broken the law.

Under the terms of her bail, Lee is not allowed to enter any international airport or port and has to report to police twice daily.

She is also not allowed to apply for another passport.

Lee has lived in Australia for five years.

She is three years through her four-year chemical engineering degree but has deferred her final year.

She is due to appear in court on June 21.