By James Greig, FMA Director of Supervision
There’s that old joke about New Zealanders welcoming international visitors straight off the plane with the words “… so what do you think of us so far?”
The latest international visitor to deliver their judgement on our country is the Financial Action Task Force (FATF), a body set up initially by the G7 to fight global money laundering and terrorist financing.
“New Zealand faces money laundering threats from proceeds of crime generated both domestically and internationally, particularly through its financial, legal, property and cash- intensive sectors,” it said in its most recent report, published last month.
And while New Zealand is a “high integrity jurisdiction with comparatively low crime rates” we also run a very open economy, with free flow of capital and people and “substantial ease of access”. You can read more of the FATF assessment and download its full report about New Zealand here.
It’s this kind of assessment that helps build our reputation with trading partners — but it’s also a timely reminder that having such an open economy leaves New Zealand open to threats from criminals.
Our anti-money laundering legislation is a key part of protecting the integrity of our financial system and it’s vital that financial services firms ensure they are compliant.
Money laundering is the “cleaning” or processing of money from the proceeds of crime in such a way to make it appear legitimate. Financial services, property and high value goods are often used to achieve this.
Illegal drugs, fraud and tax offending were identified by the New Zealand Police in the National Risk Assessment as the type of crime that was generating this money domestically. International organised crime groups also tried to move funds through New Zealand, our financial system, and legal structures.
View the short FATF video entitled "Money is not a victimless crime".
Under our Anti-Money Laundering and Countering Financing of Terrorism Act, which became law in 2009, most companies in the finance sector are required to have a written risk assessment, an AML/CFT compliance programme, and an AML/CFT compliance officer to administer and maintain it. You can read more about the different obligations and rules at the FMA website here.
The FMA is doing more than just reviewing risk assessments and checking procedures, policies and controls implemented, however.
Over the last few years we’ve issued warnings to entities, including public warnings, where we’ve seen failures to maintain adequate systems to meet the obligations of the AML/CFT legislation.
Last year we took our first anti-money laundering court action against financial services firm CLSAP (formerly KVB Kunlun New Zealand Ltd), after it failed on numerous occasions to conduct proper customer due diligence and enhanced customer due diligence, to terminate business relationships where required, to report suspicious transactions and to keep adequate records.
CLSAP has recently admitted to breaches of the Act, and the case is going to a penalty hearing in July this year.
New Zealand’s anti-money laundering laws have been in effect for some time now, so we do expect businesses to be aware of their obligations and their importance to the integrity of our financial system.
This past year has been a tough one for New Zealand business, and we appreciate all the work done in keeping up with anti-money laundering obligations. It can mean extra workload, but as the world starts to recover from last year’s turmoil, our reputation for integrity and honesty becomes even more important.
So, when we next ask the global taskforce “what do you think of us now?” they’ll confidently say New Zealand is still pulling its weight in the fight against international crime and money laundering.