Financial Crime World

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Detecting Financial Crime in New Zealand: A Comprehensive Guide

In today’s complex financial landscape, detecting financial crime has become an increasingly important challenge for businesses and regulatory authorities alike. In New Zealand, a robust anti-money laundering (AML) and countering the financing of terrorism (CFT) regime is in place to prevent and detect financial crimes.

Key Laws Affecting AML/CFT

The AML/CFT regime in New Zealand is characterized by three inter-dependent elements:

Criminal Laws

  • The Crimes Act 1961 and Terrorism Suppression Act 2002 cover money laundering and terrorist financing offenses.
  • These laws provide the foundation for the AML/CFT regime, outlining the criminal offenses related to money laundering and terrorism financing.

Regulatory System

  • The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 requires private sector reporting entities to detect ML and TF activity.
  • This law mandates that reporting entities implement effective AML/CFT controls to prevent and detect financial crimes.

Asset Recovery Regime

  • The Criminal Proceeds (Recovery) Act 2009 confiscates and forfeits assets under an active criminal proceeds recovery regime.
  • This law enables the government to recover assets obtained through criminal activity, disrupting organized crime groups and their finances.

AML/CFT Regulators

New Zealand has three separate regulators, known as “Supervisors,” for different sectors and captured activities or services:

Financial Markets Authority (FMA)

  • Supervises issuers of securities, trustee companies, futures dealers, collective investment schemes, derivatives traders, stockbrokers, financial advisors.
  • The FMA is responsible for ensuring that these entities comply with AML/CFT regulations.

Reserve Bank of New Zealand (RBNZ)

  • Regulates banks, life insurers, and non-bank deposit takers.
  • The RBNZ works to prevent and detect financial crimes in the banking sector.

Department of Internal Affairs (DIA)

  • Regulates casinos, non-deposit taking lenders, money changers/remitters, cash security firms, debt collection and factoring, financial leasing, payroll, safe deposit, tax pooling and non-bank credit card firms.
  • The DIA oversees AML/CFT compliance in these sectors.

Other Government Agencies Involved

Besides the three Supervisors, other government agencies play important roles in the AML/CFT regime:

New Zealand Police Financial Intelligence Unit (FIU)

  • Identifies and investigates suspicious transactions.
  • The FIU works closely with reporting entities to detect and prevent financial crimes.

AML/CFT National Coordination Committee

  • Led by the Ministry of Justice, this committee coordinates efforts across multiple agencies.
  • The committee ensures that all relevant government agencies work together to prevent and detect financial crimes.

Who is Covered for AML/CFT Purposes?

Whether a business is covered by the regime depends on whether it is a “reporting entity” as defined in the AML/CFT Act. In substance, that turns on the extent to which it engages in regulated services or activities.

Key Obligations for Reporting Entities

If covered, reporting entities have several critical obligations under the AML/CFT Act:

Risk Assessment

  • Carry out a risk assessment on current and potential customers, products/services, and business partners.
  • This helps identify potential risks and ensures that adequate controls are in place.

Compliance Programme

  • Establish, implement, maintain, and regularly audit a set of AML/CFT compliance policies and procedures.
  • This ensures that reporting entities have effective systems in place to prevent and detect financial crimes.

AML/CFT Compliance Officer

  • Appoint a person to act as an AML/CFT compliance officer whose responsibility is to administer the compliance programme.
  • The compliance officer plays a critical role in ensuring that the reporting entity complies with AML/CFT regulations.

Customer Due Diligence (CDD)

  • Conduct CDD measures before establishing new customer/client relationships or doing occasional transactions.
  • This helps identify potential risks and ensures that adequate controls are in place.

Monitoring and Reporting

  • Regularly monitor customer activity, especially in relation to certain high-risk transactions or types of business relationships, and report suspicious activities to the Police FIU.
  • This helps detect and prevent financial crimes.

Conclusion

Detecting financial crime requires a comprehensive approach that involves regulatory authorities, businesses, and individuals working together to prevent and detect financial crimes. In New Zealand, a robust AML/CFT regime is in place to support this effort. By understanding the key laws, regulators, and obligations, reporting entities can ensure they are meeting their responsibilities and contributing to a safer financial environment.