Hundreds of millions laundered through NZ construction each year, police warn

HouGarden New Zealand, 15 October — The report, which marks the first time police have formally communicated the extent of the infiltration to government, identifies a pattern in which criminal cash is fed into construction businesses, cycled through payroll and company accounts, and emerges as apparently legitimate revenue that can be used to buy property, transfer funds overseas, or invest in other assets.

New Zealand Herald journalist Jared Savage, who has reported extensively on the issue, described the mechanism to podcast The Detail. 'It's a money-go-round: it goes in as dirty cash, gets washed through the construction industry and then comes back out the other side as legitimate cash in shell companies which they can then use to purchase property, send overseas — whatever they want to do with it — because now, for all intents and purposes, it looks like legitimate money.'

Police describe what Savage calls 'a marriage of convenience' between gangs seeking to dispose of large volumes of cash and unscrupulous contractors who prefer to pay workers under the table and off the books. Migrant workers are frequently the ones exploited in these arrangements, receiving cash wages with no formal employment records, while the contracting businesses evade tax and undercut competitors who comply with the law.

'It's driving legitimate businesses into the ground because they can't compete with others who have an unfair advantage,' Savage said. He noted that the full scale of the problem remains uncertain: 'This is an emerging problem police have come across in the last few years, and they've only recently started talking to the construction industry about how big a problem it is.'

The police estimate that hundreds of millions of dollars is laundered through the sector each year across all criminal groups. Separately, a single police investigation — Operation Scuba, the official name for the operation — identified approximately $70 million flowing through the construction industry. Those two figures cover different scopes and should not be conflated.

Operation Scuba led to the conviction of members of the Comanchero motorcycle gang, one of New Zealand's most active organised crime groups, as well as Auckland accountant Khieng Chiv. Chiv pleaded not guilty to laundering nearly $7.8 million in drug money, but prosecutors unravelled the complex financial structures he had built to conceal the transactions. Millions of dollars were channelled through shell companies, and a senior Comanchero member was purchased a $3.8 million home as well as two businesses in Ōrewa.

Savage described some of the communications that proved damaging at trial. 'If you've got an accountant, you normally don't tell them that you're going to cave their effing head in if they don't start pulling their weight — that was one of the giveaways,' he said. 'And other messages were talking about the need to send three million dollars to Dubai essentially to fulfil a drug order from a Mexican cartel.'

Chiv was sentenced to more than 10 years in prison — the longest sentence ever handed down for money laundering in New Zealand. Savage said the sentence 'does send a message.'

The construction industry is responding. Master Builders, New Zealand's principal industry organisation for the building trade, has reminded members they should know who is working on their sites, ensure contracts are properly audited, and apply stricter transparency and verification procedures to prevent cash-wage arrangements. The organisation is also developing a national framework to put additional checks and balances in place, making it harder for money laundering through cash wages to continue.

The economic damage to law-abiding operators is tangible. Savage said he had been contacted by contractors after his reporting was published. 'I've had some people contacting me saying, "Oh, we wondered why us and three others put in roughly the same kind of bid for the work, and it went to someone else who was way cheaper; we just couldn't work out why they were so much cheaper," and now they do.'

For Chinese-speaking buyers, builders and investors, the links are direct: the laundered cash flowing through exploited migrant workforces and off-the-books payroll ultimately surfaces as funds used to acquire residential and commercial property, distorting the market for legitimate purchasers. 'It's not just a crime problem,' Savage said. 'This is a huge economic problem as well.'