AML/CFT Overview Criminal Law Team Criminal Justice Group.

AML/CFT Overview

Criminal Law TeamCriminal Justice Group

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Scale of the problem: Money laundering in New Zealand

AML/CFT overview - September 20142

Source: 2010 National Risk Assessment

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Money laundering

• Most crime in New Zealand is financially motivated• While not all crime involves organised groups, a

significant amount of crime involves organised criminal activity (typically involving drug manufacturing, prostitution and robbery).

• The current AML/CFT regime seeks to “flush out” the illegal proceeds of crime

• It adds transparency to certain financial transactions in order to detect crime and to prevent illegal proceeds from being reinvested in criminal conduct.


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The money laundering process


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AML risks for NGOs to bear in mind

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AML/CFT is about systems for following the money trail to detect serious crimes

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The AML/CFT Act

• AML/CFT Act came into force on 30 June 2013• Obligations are placed on reporting entities (financial

institutions and casinos): • AML/CFT risk assessment and compliance

programme• identify customers and verify identity• keep records• monitor accounts• report suspicious transactions to the Police


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The AML/CFT Act – 1 year on


There has been an increase in the number of STRs…

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The AML/CFT Act – 1 year on


…and in the quality of STRs:

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Compliance is supervised by Government agencies

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Why have AML/CFT obligations – International context

• Financial Action Task Force 40 recommendations drives international AML/CFT compliance

• NZ currently serving as the co-chair of the Asia Pacific Group on Money Laundering (2014-2016)

• NZ’s international reputation will affect its bid to be a member of the UN Security Council (Security Council Resolution No 1617)

• UN Convention Against Trans-National Organised Crime• International Convention for the Suppression of

Financing of Terrorism


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The FATF recommendations for AML/CFT


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Why have AML/CFT obligations – International context

• Robust AML/CFT measures help to maintain NZ’s reputation as a trusted trading partner

• NZ’s FATF rating has a direct impact on international trade • NZ was dropped from the European Union “White List”

in 2012 for perceived weaknesses in AML/CFT regime

• International participation provides NZ with direct access to best practice, emerging trends and forms basis on domestic enforcement.


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Why have AML/CFT obligations – Domestic Context

• Analysis has shown that overall crime levels can be reduced by improving AML/CFT policies:• Help to detect offending, supporting effective

investigation and prosecution of crime• Support the proceeds of crime regime to seize illegally

obtained money and prevent it from being funnelled back into criminal activity

• Deter potential criminals from illegal behaviour by removing the incentives, and therefore lowers the crime rate

• Support the tax regime, helping to detect and prosecute tax evasion.


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Case studies

• 2009: SP Trading Ltd, NZ shell company used to traffic arms from North Korea

• 2012: Falcona Systems Ltd, NZ shell company involved in laundering over US$150 million derived from fraud by Ukrainian and Latvian officials


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The Organised Crime and Anti-Corruption Legislation Bill

• The Organised Crime and Anti-corruption Legislation Bill is part of the Government’s All of Government Response to Organised Crime to combat calculated, profit motivated, serious offending.

• Introduced into Parliament in June 2014• Gives law enforcement agencies in New Zealand the

power to deal with organised crime and corruption, should it occur.

• Ensures New Zealand complies with international obligations, improving our ability to support global efforts to tackle serious crimes.


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• Key new measures:• Requiring banks to report all international transfers of

$1,000 or more and all physical cash transactions of $10,000 or more to the FIU

• Redrafting the money laundering offence to specify that intent to conceal is not required

• Introducing new offences to address identity crime, including selling or passing on identity information

• Amending the people trafficking offence so that it applies to such activity in New Zealand, not just when victims are moved in or out of this country


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• Key new measures (cont):• Amending the Policing Act 2008 to expressly provide

Police with a power to share information with its international counterparts

• Revising the foreign bribery offence, including clarifying the circumstances in which a corporation is liable for foreign bribery

• Increasing penalties for bribery and corruption in the private sector to bring them into line with public sector bribery offences


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Reporting international transfers and physical cash transactions:• Does not affect CDD already required of customers• Banks and other financial institutions already required to

conduct CDD and collect identity info for wire transfers and physical cash transactions over threshold

• Amendments mean that banks will be required to forward what they already collect to the FIU

• Should have no practical effect on customers who currently conduct transactions over threshold


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Reporting international transfers and physical cash transactions (cont):• Amendment responds to specific FATF recommendation,

which requires threshold to be set no higher than 1,000/10,000 EU/USD

• Threshold of 1,000/10,000 NZD chosen to provide certainty against currency fluctuation

• Consistent with similar regime in Canada• More lenient that comparable regime in Australia – currently

all international funds transfers reported regardless of amount


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Removing the intent to conceal:• Intent to conceal has never been an express legislative

requirement • Early case law on money laundering read this requirement

into the money laundering offence• This amendment clarifies the original legislative intent• NZ has been criticised international for this perceived

deficiency in the courts’ interpretation of the offence• The amendment brings the law back into step with

international best practice and NZ’s obligations


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Questions?

Contact: [email protected]

www.justice.govt.nz


AML/CFT Overview Criminal Law Team Criminal Justice Group.

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