At its core, money laundering is how criminals take illicit money like drug money and ‘clean it’ so its illegal origins are obscured. They feed it through the legitimate financial system so it comes out looking legit. The ultimate goal is to be able to safely invest or spend the money without linking themselves to the original crime.
Those who finance terrorism use similar techniques to transfer money to terrorist activities or support without being detected.
The Financial Action Task Force (FATF) is the global money laundering and terrorist financing watchdog. It's the inter-governmental body that sets international standards aiming to prevent laundering and terrorist financing and the harm they cause to society. It sets international policy in an effort to engender national legislative and regulatory reforms in member countries. The FATF has issued Recommendations that provide a comprehensive action plan to fight laundering and terrorist financing.
As a FATF member, New Zealand is required to implement these Recommendations. It does so by making certain businesses use protective and deterrent measures, including a Risk Assessment and a Compliance Programme.
The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 came into force in 2013. It originally required New Zealand’s financial institutions and casinos to detect and deter money laundering and terrorism financing. Financial institutions are more than just the big banks and insurers, and included around 2,000 companies. Now, some non-financial businesses have also been rolled in. These are the law firms, accountants, real estate agents and a few others, taking the number of reporting entities under the DIA alone to 5,000 let alone the FMA and RBNZ entities on top.
The Act has teeth, ranging from intervention from the supervising bodies who can issue formal warnings, name and shame non-compliant businesses in the media, apply to the High Court to impose fines, enforceable undertakings and injunctions, all the way up to criminal prosecutions of companies and individuals.
There are three government regulators, known as the ‘Supervisors’. Each regulates a distinct group of business types:
As well as the three Supervisers, another key government player is the New Zealand Police’s Financial Intelligence Unit (FIU). The FIU collates information about suspicious financial transactions and activities, international wire transfers, large cash transactions, suspected terrorist property, and border cash reports.
Businesses need to quickly assimilate to this regime, starting by undertaking a ‘Risk Assessment’. This exercise considers how they may face money laundering or terrorism financing risks in the course of doing their business. Helpful online resources walk you through this.
The Risk Assessment then becomes the basis for the second document, the ‘Compliance Programme’. The Programme is a comprehensive plan on how the business will meet its new legal requirements. It contains processes designed to detect, deter, manage and mitigate money laundering and the terrorism financing.
Compliance Officer must be appointed to administer and maintain the Compliance Programme.
Important aspects of the business’s AML/CFT procedures include requirements to:
- undertake customer due diligence,
- monitor clients’ transactions and activities,
- report suspicious activities to the FIU,
- lodge an annual report to the relevant Supervisor,
- undertake internal reviews to test and update the Risk Assessment and Compliance Programme, and
- engage an independent auditor every two years.
Robinson Legal's team are litigation specialists who bring unparalleled AML/CFT experience to our clients. We have extensive prosecution and defence experience, and have advised government, corporate and individual clients on financial crime, AML/CFT, the full range of criminal cases and regulatory investigations and prosecutions.
Our Principal, Marty Robinson, co-wrote the legal text The AML/CFT Regime: A Practical Guide. Marty has spent two decades in financial crime and associated areas, including investigation and prosecution work at the UK Serious Fraud Office as an Investigative Lawyer and acting as Principal Solicitor at New Zealand’s Department of Internal Affairs, a Crown Prosecutor at the Crown Solicitor’s Office, and a criminal defence and civil litigation lawyer on his own account and with Robinson Legal.