Financial Crime World

New Zealand’s Financial Action Task Force (FATF) Guidelines Under Scrutiny Amid Panama Papers Scandal

The recent Panama Papers revelations have sparked a heated debate in New Zealand over whether the country’s business structures and investments are being exploited by foreign criminals to launder money and evade taxes. However, experts argue that New Zealand has a robust anti-money laundering (AML) and countering financing of terrorism (CFT) regime that aligns with international norms.

FATF Framework: 40 Recommendations for Compliance

As a member of the Financial Action Task Force (FATF), an inter-governmental body established in 1989 to combat money laundering and terrorist financing, New Zealand is expected to comply with FATF’s framework of 40 recommendations. These include:

  • Requirements for reporting suspicious transactions
  • Providing mutual legal assistance
  • Ensuring the beneficial ownership and control of legal persons are easily accessible

AML/CFT Regime: Evolution and Compliance

In 2009, a Mutual Evaluation Report published by the FATF and the Asia-Pacific Group on Money Laundering found New Zealand to be non-compliant in several areas, including:

  • Due diligence processes
  • Internal controls
  • AML/CFT regulation

However, following the enactment of New Zealand’s Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act), most of these concerns were addressed by the October 2013 follow-up report.

Obligations on Reporting Entities

The AML/CFT Act imposes obligations on specified reporting entities, including:

  • Financial advisers
  • Casinos
  • Trust and company service providers

These entities must:

  • Conduct due diligence on customers and beneficial owners
  • Monitor transactions
  • Report suspicious activities to the Commissioner of Police

Response to Panama Papers Scandal: Strengthening AML/CFT Regime

In response to the Panama Papers scandal, New Zealand’s justice minister Amy Adams has announced plans to “fast-track” changes to the AML/CFT regime, which will extend obligations to additional professionals, including:

  • Lawyers
  • Accountants
  • Conveyancers
  • Real estate agents

These changes are expected to be in place by mid-2017.

Conclusion

While these developments may increase compliance burdens for businesses operating in New Zealand, they are likely to help alleviate concerns over the country’s reputation as a hub for money laundering and tax evasion. As New Zealand continues to strengthen its AML/CFT regime, it is clear that the country is committed to upholding international standards and maintaining its position as one of the least corrupt countries in the world.