General policy statement
Money laundering is the process by which money obtained through crime is made legitimate to conceal its criminal origins. Financiers of terrorism use similar techniques to money launderers to avoid detection by authorities and to protect the identity of those providing and receiving the funds.
This Bill amends the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (the Act). The Act aims to detect and deter money laundering and financing of terrorism so that criminals cannot enjoy the profits of their activity, or reinvest it into further criminal conduct, including the financing of terrorism. It currently applies to banks, financial institutions, and casinos, and sets out those entities’ core obligations, including—
developing a risk assessment and compliance programme:
undertaking customer due diligence (customer identification and verification):
submitting suspicious transaction reports to the Financial Intelligence Unit of the New Zealand Police.
This Bill will amend the Act so that the obligations also apply to real estate agents, lawyers, accountants, conveyancers, the New Zealand Racing Board, and some high-value dealers. When undertaking certain activities that pose a high risk for money laundering and terrorism financing, these sectors will be required to know who their customers are and on whose behalf they act. The sectors will be required to report large cash transactions, and (other than high-value dealers) will also be required to report suspicious activity, and develop and maintain a risk assessment and compliance programme. High-value dealers will be able, but not required, to report suspicious activities that come to their attention.
The Bill also establishes the Department of Internal Affairs as the relevant anti-money laundering and countering financing of terrorism (AML/CFT) supervisor for estate agents, lawyers, accountants, conveyancers, the New Zealand Racing Board, and some high-value dealers. Supervision of Phase II businesses and professions is essential to ensure that AML/CFT obligations are implemented in practice. This is important to ensure that Phase II businesses are not being misused and to protect New Zealand’s international reputation as a hostile environment for criminal funds.
The Bill also makes amendments to existing provisions to improve the operation of the AML/CFT regime. These include—
expanding the scope of reporting requirements to include reporting suspicious activities (this implements a recommendation made by the recent Government Inquiry into Foreign Trust Disclosure Rules by John Shewan):
expanding the situations where reporting entities can undertake simplified customer due diligence:
providing greater flexibility to share information to meet the purposes of the Act, including mechanisms to enable information flows between the Government and the private sector (this implements a recommendation made by the recent Government Inquiry into Foreign Trust Disclosure Rules by John Shewan).
The expanded scope of the Act will mean that, if the Police need to investigate money laundering or organised crime, the Police can more easily access relevant information and trace who has been involved.
New Zealand’s AML/CFT regime also helps New Zealand meet its international obligations under the Financial Action Taskforce (FATF)—an inter-governmental forum of technical experts on money laundering and countering terrorist financing. Expanding the sectors covered by the Act will close the existing regulatory gaps and align with FATF recommendations. This expansion will improve the ability to detect and deter money laundering and terrorism financing, and enhance New Zealand’s international and trade reputation.
The provisions of the Bill strike a balance between combating crime, minimising costs, and enabling New Zealand to meet its international obligations. New Zealand needs to ensure that it is not a weak link in international efforts to counter money laundering and the financing of terrorism.