AMLFinTechSanctions

Gangs of New Zealand

By March 13, 2018 No Comments

Getting serious – Financial crime in New Zealand

On Monday, New Zealand’s Financial Markets Authority (FMA) issued warnings against five companies for weaknesses in their AML/CTF procedures, as part of their annual review of company risk assessments. Although the regulator was mostly pleased with the general level of compliance across financial services, they took the opportunity to remind firms how seriously they take their supervisory role in countering financial crime. But some may ask the question why does New Zealand, a country not known for financial crime, need to take its prevention so seriously?

A large part of the financial crime picture in New Zealand involves gangs. In fact, New Zealand has a significant gang problem, with more gang members than soldiers, many are linked to international franchises such as the Hells Angels and the Comancheros. They tend to be involved in the trafficking of methamphetamine and other drugs which of course, necessitates money laundering. Authorities take this problem very seriously and view the use of financial intelligence and asset forfeiture as key to curtailing gang activity, seizing over $250 million of assets over the last few years. Increasingly, seemingly clean countries like New Zealand are getting serious about financial crime others should follow their example.  

A little less conversation – FATF makes progress on FinTech  

One of the biggest regulatory challenges that the FinTech industry faces is understanding their AML/CTF requirements. T0 date, this has been made more difficult by the AML/CTF ‘standards setter’ –  the Financial Action Task Force (FATF) – not publishing a clear position on their recommended approach to the risks of FinTech and RegTech. Last Thursday, a breakthrough was made when after months of outreach, FATF formally launched its FinTech & RegTech initiative.

In his announcement of the initiative, the FATF President Santiago Otamendi stated that FATF strongly supports responsible financial innovation which is in line with FATF standards. Sighs of relief were heard across the FinTech and RegTech communities as a negative position from FATF would have been a considerable setback for the industry – most notably for banking relationships. A new FATF webpage was also announced where member states can post their domestic approaches to FinTech. So far Australia, Germany, Gibraltar, Jersey and Mexico have all contributed. FATF has high hopes for this knowledge sharing platform which could be used to inform the decisions of domestic regulators. Hopefully all this conversation will lead to a little more action in the FinTech regulatory space.

In sheep’s clothing – the professions that facilitate corruption

When over $4.5 billion dollars was funneled out of the Malaysian state investment fund and transferred to offshore accounts, then used to buy diamonds, works of fine art and finance Hollywood films, how did the banks and the auditors who facilitated the transfers fail to notice anything suspicious? This is one of the many questions raised by Global Witness’ new deep dive into the 1MDB Scandal released on Monday.

What’s interesting is that this report doesn’t criticize the weaknesses in the global regulatory framework, instead it calls into question those who should be enforcing it. Checks on the beneficiaries of payments, the political exposure of account owners as well as basic transaction monitoring would all have identified that something suspicious was going on with the 1MDB fund. But over and over again, checks weren’t carried out by banks and auditors brushed concerns over flaws in AML/CTF procedures under the carpet. What the 1MDB scandal and this report should remind us all of, is that a regulatory framework is only as strong as the people and professions who enforce it. Without strong implementation from banks, accountants, auditors and the legal sector, illicit actors will always be able to exploit the system for their own gain.

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