Money laundering, international trade sanctions, bribery, corruption and modern slavery.
In our globalised digital economy, it is becoming increasingly difficult for New Zealand law enforcement agencies to prevent criminals from using sophisticated money laundering schemes, despite the authorities’ best efforts.
This raises an alarming dilemma for New Zealand company boards and management.
How can they adequately ensure the hundreds of millions of transactions their organisations’ conduct every year meet strict Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) guidelines?
If you are one of thousands of New Zealand businesses in the following industries, you could be affected:
- life insurers
- non-bank deposit takers
- issuers of securities
- trustee companies
- futures dealers
- collective investment schemes
- financial advisers
- non-deposit taking lenders
- money changers
- foreign exchange
- law firms
- trust and company service providers and
- real estate agents.
The penalties for those New Zealand businesses caught failing to prevent these transactions are becoming more severe, with fines of up to $5 million for businesses, and $300,000 for individuals and up to 2 years in prison.
In March 2020, money remitter Jiaxin Finance was sentenced by the Auckland High Court to pay a fine of $2.55 million, for failing to conduct customer due diligence, reporting and keeping records of suspicious transactions relating to an international customer.
The two owners of Jiaxin Finance have been sentenced to pay a fine of respectively NZ$180,000 and NZ$202,000.
Later in July, the Auckland High Court issued a judgment in the civil proceedings by the DIA against Auckland based money remitter OTT Trading Group Limited (OTT) and Christchurch based money remitter, MSI Group Limited (MSI). These proceedings under breaches of the AML/CFT Act resulted in fines of $3.1 million awarded against OTT and $4.485 million awarded against MSI.
In Australia, Tabcorp was fined AU$45 million in 2017 for AML failures, only to be topped by the Commonwealth Bank of Australia’s AU$700 million in 2018, which in turn was surpassed by September 2020’s eye-watering AU$1.3 billion for Westpac bank.
How did we get here?
Internationally, both AML and CFT laws were set up following the 2001 9/11 terrorist attacks, prompting governments to cooperate in bringing to justice those who fund terrorist activities.
In New Zealand it took a little longer, with Phase 1 of the AML/CFT Act coming into effect in 2013, applying to banks, casinos and a range of financial service providers.
From 2017, the net was cast further to include Designated non-financial businesses and professions (DNFBPs).
Government agencies who may have an eye on you are the Reserve Bank of New Zealand (RBNZ), the Financial Markets Authority (FMA) and the Department of Internal Affairs (DIA) with additional support from the Ministry of Justice, the New Zealand Police Financial Intelligence Unit (FIU) and the New Zealand Customs Service.
New Zealand authorities are also increasingly sharing AML data with their international counterparts, as Interpol and other policing agencies have an incentive to work together for a common good.
So international scrutiny on your commercial trading efforts may be about to increase.
In September 2020, an international media investigation released documents on more than 2,100 suspicious activity reports, or SARs, filed by global banks with the United States Treasury Department’s intelligence unit, the Financial Crimes Enforcement Network, known as FinCEN, in recent years, showing concerns about what their clients might be doing.
The released files show more than $US2 trillion ($2.7 trillion) in suspected ‘dirty money’ moving through the global financial system.
They reveal how politicians, crooks, and tycoons – from Benin to Venezuela to Turkmenistan – profit at the expense of governments and ordinary people.
At least 20% of the reports contained a client with an address in one of the world’s top offshore financial havens, the British Virgin Islands, while many others provided addresses in the U.K., the U.S., Cyprus, Hong Kong, the United Arab Emirates, Russia and Switzerland.
How do avoid any problems? Know your customer…and keep knowing them!
The days are gone where New Zealand businesses could sign up a customer and then fail to monitor their spending and transaction history from that point on.
Monitoring and due diligence are particularly important for those with ageing legacy IT systems.
illion has some of the most advanced and sophisticated data systems in New Zealand to help organisations navigate through the maze of rules and regulations and protect them from unintended breaches.
After all, the only thing at stake is your personal and professional reputation. Once lost, it can never be truly recovered.