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Financial Crime Investigation Methods in New Zealand Face Scrutiny

New Zealand’s regulatory landscape for anti-money laundering (AML) and countering the financing of terrorism has undergone a peer review by the Financial Action Task Force (FATF). The latest report, spanning over 260 pages, provides insights into the country’s efforts to combat financial crime.

The Link Between Money Laundering and Corruption

The FATF report highlights the link between money laundering and corruption, noting that the latter is often enabled by the former. It emphasizes the importance of making it difficult for criminals to profit from their illicit activities while gathering intelligence to reveal the underlying crimes.

Loophole in AML Legislation

However, the report also notes a significant exception in New Zealand’s AML legislation. While organizations must conduct enhanced checks on politically exposed persons (PEPs) from abroad, domestic PEPs are exempted from these requirements. This loophole has raised concerns about the lack of transparency and accountability.

Beneficial Ownership Controls

The report also raises questions about the effectiveness of beneficial ownership controls. While the law defines a “beneficial owner” as an individual with effective control over a customer or transaction, many organizations rely on a 25% ownership threshold to determine control. This can lead to proxy ownership arrangements that circumvent statutory requirements.

Trusts and Nominee Arrangements

The FATF report notes that New Zealand has a large number of trusts and lacks effective measures for dealing with nominee arrangements. While the Serious Fraud Office is responsible for investigating corruption cases, there is limited information available on referrals between government agencies related to these matters.

Call for Greater Transparency

In light of the report’s findings, experts are calling for greater transparency in beneficial ownership controls and the establishment of a trust register. The FATF report has also highlighted the need for New Zealand to stay ahead of the curve in AML policy development, including the adoption of a single responsible agency model similar to Australia’s approach.

International Attention

The report’s release has been met with international attention, with the Wall Street Journal reporting that New Zealand scores well on anti-money laundering efforts but still faces gaps in its regulatory framework. The Financial Action Task Force, established in 1989, is an intergovernmental body that sets international standards for preventing money laundering and terrorist financing.

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