Financial Crime World

Financial Crime Cases in Focus as NZ’s Anti-Money Laundering System Gets Mixed Review

New Zealand’s efforts to combat money laundering and terrorist financing have been given a mixed review by the Financial Action Task Force (FATF) and the Asia-Pacific Group on Money Laundering (APG). A comprehensive report has highlighted both strengths and weaknesses in the country’s anti-money laundering and counter-terrorist financing (AML/CFT) system.

Strengths of New Zealand’s AML/CFT System

  • Robust understanding of risks: New Zealand has developed a comprehensive multi-tiered risk assessment process, which has delivered good results.
  • Effective AML/CFT system: The country has implemented an effective AML/CFT system that includes the use of financial intelligence and investigation tools to support investigations.
  • Cooperation with international partners: New Zealand’s authorities cooperate well with international partners in combating financial crime.

Weaknesses of New Zealand’s AML/CFT System

  • Loopholes regarding beneficial ownership: The report noted that NZ’s efforts are undermined by loopholes regarding beneficial ownership and nominee directors and shareholders.
  • Need for greater resourcing of supervision: There is a need for greater resourcing of supervision of the banking sector to ensure effective implementation of AML/CFT measures.
  • Better understanding and mitigation of money laundering risks in non-financial sector: Businesses in the non-financial sector need to better understand and mitigate their money laundering risks.

Gaps in Implementation of Targeted Financial Sanctions

The report highlighted gaps in New Zealand’s implementation of targeted financial sanction measures, which are necessary to address the country’s large-scale terrorist financing risks mainly related to overseas-based groups. NZ’s authorities remain alert to funds being used for domestic terrorist attacks following the Christchurch attack on March 2019, but there is scope to improve the use of effective, proportionate and dissuasive sanctions.

Recommendations from FATF

The FATF adopted the report at its February 2021 Plenary meeting, highlighting the need for New Zealand to focus more on improving the availability of beneficial ownership information, strengthening supervision, and implementation of targeted financial sanctions. NZ’s AML/CFT system has been found to be effective in many respects, including cooperation with international partners and a strong focus on restraint and forfeiture of criminal assets. However, businesses in the non-financial sector need to better understand and mitigate their money laundering risks, while the country’s three AML/CFT supervisors have a good understanding of the risk profiles of their respective sectors.

Conclusion

The report has been welcomed by NZ authorities as a useful tool for improving the country’s efforts to combat financial crime. However, it highlights a need for greater attention to be paid to addressing loopholes and gaps in the system to ensure that New Zealand remains ahead of the game in preventing money laundering and terrorist financing.