Money Laundering

What is it and why do we care?

Money laundering is the process whereby funds generated illegally, are put through a series of transactions so the tracing of funds to the illegal activity is difficult or impossible.

  • Behind this activity are some of the worst crimes committed on the planet today – slavery, forced prostitution, drug trafficking, fraud, theft, and diversion of aid or government funds.
  • The OECD estimates that 2-3% of the worlds GDP is tied to these activities. To provide perspective, that’s about the same as the total economy of Russia or Australia.
  • The New Zealand dollar is the 10th most traded currency globally. As a highly traded currency, we have our part to play as it is certain the New Zealand dollar is being utilised for money laundering both locally and globally.
  • New Zealand is committed by several international agreements which have required us to both enact and enforce legislation relating to Anti-Money-Laundering.

Suspicious Transactions and Activities

  • A suspicious transaction will generally be one that is inconsistent with the customer’s known activities and profile, or with the normal business expected for that type of client.
  • A suspicious activity is one that could also provide valuable intelligence where a transaction may not have been completed but the reporting entity has reasonable grounds to suspect that activity may relate to specified money-laundering or terrorism offending, or the proceeds of a crime. Note the word ‘may.’

Beneficial Ownership or the ‘Controlling Mind’

A key to making this all work and a focus of the New Zealand regulations is aimed at ensuring the beneficial ownership or controlling mind behind any financial transaction is transparent, so the risk of money laundering can be assessed.

  • Most individual customers, beneficial owners and persons acting on behalf of customers, are required to provide evidence of their identity and residential address.
  • Reporting Entities are required to ensure that all documentation supplied for customer due diligence purposes satisfies the standard set out in the AML/CFT Act and the Identify Verification Code of Practice 2013.

AML/CFT Supervisors

Reporting entities need to be familiar with the obligations imposed by the AML/CFT Act. All AML reporting entities who identify any suspicious activities or transactions must file the appropriate report to NZ Police Financial Intelligence Unit (FIU).

Each set or grouping of Reporting Entities has a government AML/CFT Supervisor that sets detailed rules for how the AML/CFT legislation is to be implemented.

These supervisors are also responsible for messaging and information, monitoring compliance, and prosecuting non-compliance.

  1. The Reserve Bank of New Zealand (RBNZ) – banks, life insurers and non-bank deposit takers.
  2. The Financial Markets Authority (FMA) – issuers of securities, trustee companies, futures dealers, collective investment schemes, brokers, and financial advisers.
  3. The Department of Internal Affairs (DIA) – casinos, non-deposit taking lenders, money changers, and any other financial institutions not supervised by the Reserve Bank of New Zealand or the Financial Markets Authority.

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