New Zealand’s Ministry of Justice this week invited feedback on possible changes to its AML/CFT Act as the country works to implement recent recommendations from the Financial Action Task Force (FATF).
The consultation is part of a review of the Act that began in July, to help strengthen New Zealand’s AML/CFT system and ensure it is still fit for purpose. In a statement, the Justice Ministry said: “This review presents an opportunity to look back on the past eight years and ask ourselves: have we got this right? Does the regime effectively achieve its purposes in the most cost-efficient way? What can we do better? What can we do without?”
The FATF’s Mutual Evaluation Report, released in April, identified 12 areas of AML/CFT risk where New Zealand is only partially compliant. These shortcomings include sensitive issues such as politically exposed persons (PEPs), money or value transfer services (MVTS), internal controls, higher-risk countries, wire transfers, beneficial owners, and Designated Non-Financial Businesses and Professions’ (DNFBPs) due diligence, regulation, and supervision.
The intended outcome of the review is to make New Zealand “the hardest place in the world for money laundering, terrorism financing, and financing the proliferation of weapons of mass destruction.”
It is estimated that over $1bn a year from drug dealing and fraud is laundered through New Zealand businesses.
Review of next steps
Possible changes outlined in the review include introducing a new registration process for all businesses with AML/CFT obligations, a licensing regime for virtual asset service providers (VASPs), and direct penalties for senior managers. It also addresses whether changes should be made to institutional arrangements and stewardship under the Act.
Feedback is sought on challenges faced by individuals and businesses such as opening bank accounts and overseas payments; and the role, powers, and information sharing practices of the main agencies responsible for AML/CFT – the Department of Internal Affairs, the Financial Markets Authority (FMA), the country’s central bank the Reserve Bank of New Zealand (RBNZ) and the New Zealand Police.
FATF’s latest Mutual Evaluation Report criticized the RBNZ for its inadequate AML/CFT resources and revealed it has just five full-time staff dedicated to financial crime compliance supervision.
Stronger civil and criminal penalties are also being considered by the review, along with enabling AML/CFT supervisors to directly penalize employees, directors, and senior managers.
The public consultation closes on 3 December and a report is due on 30 June 2022.
The review is a further sign of the strengthening of AMF/CFT measures across much of the Asia-Pacific region, including Australia’s Anti Money Laundering Act, Singapore’s new information-sharing platform, revised regulatory guidelines in Hong Kong, and beneficial ownership transparency in the Philippines.
The consultation provides a valuable opportunity for compliance teams to help shape AML/CFT legislation in New Zealand and provide feedback on issues that will impact their everyday work. Compliance officers should familiarize themselves with the consultation document and be prepared for suggested changes, particularly around areas of weakness highlighted in the FATF report, such as virtual asset regulation.
Risks highlighted in both the review and FATF report should be revisited, as they will provide a good indication of areas where changes are likely. Compliance teams should consider the types of controls they have in place and if they are able to manage the risks posed from a financial crime perspective.