Financial Crime World

Banking Industry’s Response to Financial Crime Under Scrutiny in New Zealand

New Zealand’s banking sector has received praise for its efforts to combat financial crime, but a recent report highlights areas where improvement is needed.

FATF Report Highlights Progress and Challenges

The New Zealand Follow-Up Report 2024, published by the Financial Action Task Force (FATF), assesses the country’s progress in implementing anti-money laundering and counter-terrorism financing measures. The report uses ratings to evaluate compliance with FATF Recommendations, with four categories: compliant (C), largely compliant (LC), partially compliant (PC), and non-compliant (NC).

Compliance with FATF Standards

The report found that 17 out of 40 recommendations were fully compliant with the FATF standards. These include:

  • Assessing Risk and Applying a Risk-Based Approach (R.1): New Zealand’s financial institutions have implemented effective risk assessment procedures.
  • National Cooperation and Coordination (R.2): The country has established a national coordination mechanism to prevent money laundering and terrorism financing.
  • Customer Due Diligence (R.10): Financial institutions in New Zealand have implemented robust customer due diligence measures.

Areas Requiring Improvement

However, several areas require improvement, including:

  • Regulation and Supervision of Financial Institutions (R.26): The report noted that New Zealand’s regulatory framework for financial institutions needs to be strengthened.
  • DNFBPs Regulation and Supervision (R.28): The country’s regulation and supervision of designated non-financial business or professions need to be improved.
  • Transparency and Beneficial Ownership of Legal Persons and Entities (R.24 and R.25): New Zealand is partially compliant with these requirements, and more work is needed to address issues related to transparency and beneficial ownership.

Recommendations for Improvement

The Reserve Bank of New Zealand and other regulatory bodies will need to continue to monitor progress and implement reforms to ensure that the country remains compliant with international anti-money laundering and counter-terrorism financing regulations. Specifically:

  • Address Issues Related to Correspondent Banking, Money or Value Transfer Services, and Wire Transfers: The report noted that more work is needed in these areas.
  • Strengthen Regulation and Supervision of Financial Institutions and DNFBPs: The country needs to improve its regulatory framework for financial institutions and designated non-financial business or professions.

The FATF will continue to monitor New Zealand’s progress in implementing the necessary reforms, and the country will need to demonstrate significant improvements in areas where it has been rated as partially compliant or non-compliant.