Sarah Mouhanna was charged with displaying the banned Hezbollah flag at a pro-Palestine protest in Sydney's city centre on September 29, 2024.
The 20-year-old has pleaded not guilty to public display of a prohibited terrorist symbol, and is the first person to contest the national laws introduced in 2023.
The case continued at Downing Centre Local Court on Thursday where she watched as prosecutors played video footage of her at the protest.
It showed her in a large crowd wearing a flag draped across her back.
Organisers with 'Palestine Action Group' written on the back of orange vests appeared to approach Mouhanna in the footage.
She then appeared with the flag folded at her side and speaking to police Chief Inspector Nicole Roach.
The officer told the court it was a Hezbollah flag and that prior to the footage being recorded she saw Mouhanna holding it in the air.
"The marshalls have already spoken to me and told me to put it away…I didn't know you couldn't have it," Chief Insp Roach said Mouhanna told her.
She added the two of them came to an agreement that Mouhanna would get a plastic bag to place it in.
Mouhanna's barrister Thomas Woods said that several others were seen displaying Hezbollah's official ensign - a yellow banner featuring an arm raising an assault rifle.
He asked Detective Sergeant Benjamin Meizer, who was in charge of reviewing the CCTV footage why she was the only person charged that day.
Police had warned others displaying Hezbollah symbols to stop doing so and they seemed to have complied, Det Sgt Meizer responded.
CCTV footage showed Mouhanna marching in the crowd with the flag draped across her back again, after she was warned by Chief Insp Roach.
The protest was larger than others in September 2024 due to Israel's expansion of the middle eastern conflict into the Hezbollah stronghold of southern Lebanon.
Mr Woods had previously said the matter was unconstitutional because it infringed on the implied freedom of political speech.
It raised concern about whether the matter had to be heard in the high court however both state and federal attorneys-general did not move to oppose it being heard in local court.
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