Financial Crime World

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New Zealand Fails to Meet Expectations in Anti-Money Laundering and Combating the Financing of Terrorism Efforts

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A recent report by the Financial Action Task Force (FATF) has highlighted several areas where New Zealand is falling short in its efforts to combat money laundering (ML) and the financing of terrorism (CFT).

Key Concerns Identified

The FATF report noted that New Zealand’s lack of a central source of information on legal arrangements, such as trusts, and inadequate sanctions have been identified as major concerns.

Inadequate Beneficial Ownership Information

Supervisors’ Access to Accurate Data

  • New Zealand’s supervisors do not have access to accurate and up-to-date beneficial ownership information, making it difficult for them to effectively supervise reporting entities.
  • The lack of a complete register of trust and company service providers also raises concerns about the ability of these entities to provide nominee services without detection.

Inadequate Sanctions

Non-Proportionate and Dissuasive Penalties

  • The sanctions available to AML/CFT supervisors in New Zealand are not proportionate or dissuasive enough to deter non-compliance with AML/CFT requirements.
  • The country’s failure to register companies and its lack of sanctions against individuals who breach AML/CFT rules have also been criticized.

Recommendations by the FATF

The FATF has recommended that New Zealand introduce measures to:

Improve Beneficial Ownership Information

  • Introduce measures to improve the availability of accurate beneficial ownership information on legal persons and domestic express trusts.
  • Implement measures to mitigate the ML/TF risk posed by nominee shareholders and directors.

Enhance Sanctions Regime

  • Ensure that proportionate and dissuasive sanctions are available and enforced for breaches of AML/CFT requirements.

Develop a Trust and Company Service Provider Register

  • Develop a complete trust and company service provider register.

International Cooperation

The report praised New Zealand’s efforts in providing constructive and timely mutual legal assistance and extradition requests. However, it recommended that the country review and strengthen its mutual legal assistance and extradition regime to improve efficiency.

  • The FATF also encouraged New Zealand to maintain better statistics on mutual legal assistance, extradition, and exchanging basic and beneficial ownership information of legal persons and arrangements.

Conclusion and Next Steps

The report’s findings were based on a Mutual Evaluation conducted by the FATF. New Zealand has been given several months to implement the recommended actions to address the issues identified in the report. Failure to do so may result in further action being taken by the FATF, including the possibility of being placed on a list of countries that pose a high risk for ML/TF.

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If you have any questions about the Mutual Evaluation, the FATF Recommendations or the AML/CFT sphere more generally, please contact one of our experts.