New Zealand’s Anti-Money Laundering and Counter-Terrorist Financing Measures Under Scrutiny
Wellington, New Zealand - The Financial Action Task Force (FATF) has recently released a report highlighting concerns over New Zealand’s anti-money laundering (AML) and counter-terrorist financing (CFT) measures. While significant progress has been made in implementing AML/CFT regulations, several shortcomings remain.
Lack of Effective Supervision
One of the main concerns is the lack of effective supervision of financial institutions and designated non-financial businesses and professions (DNFBPs). The report notes that no competent authority has a mandate to supervise these entities for compliance with their AML/CFT obligations, leading to a lack of understanding among reporting entities.
Ineffective Confiscation of Non-Declared Cash
The report also highlights concerns over the confiscation of non-declared cash. Only a small portion of this cash is confiscated, and the penalties applied are not sufficiently dissuasive.
Terrorist Financing
In terms of terrorist financing, the report notes that New Zealand has dedicated units to monitor possible terrorism financing within the Financial Intelligence Unit (FIU) and the National Security Group (NSG) of the New Zealand Police. However, there have been no prosecutions for terrorism financing cases to date, consistent with New Zealand’s risk profile.
Frozen Assets
The report also highlights the lack of frozen assets in New Zealand pursuant to any CFT regimes, which could reflect the limited guidance and lack of outreach to and supervision of reporting entities for CFT.
Preventive Measures
In terms of preventive measures, the report notes that the implementation of AML/CFT controls by banks and other large financial institutions (FIs) is generally of a good standard. However, areas for enhancement include:
- PEPs and sanctions screening
- Customer due diligence on existing customers
- Group-wide risk management
Suspicious Transaction Reporting
The report also notes that the level of suspicious transaction reporting (STR) and suspicious activity reporting (SAR) by DNFBPs remains low, particularly by trust and company service providers (TCSPs), law firms, accounting practices, and real estate agents. Challenges faced by reporting entities in registering and filing with the FIU portal also present a barrier to effective reporting.
Supervision
The report notes that New Zealand has three supervisors - the Reserve Bank of New Zealand, the Financial Markets Authority, and the Department of Internal Affairs - which oversee compliance with AML/CFT obligations. However, no agency has a mandate to supervise the implementation of CFT obligations.
Conclusion and Recommendations
The report concludes that while significant progress has been made in implementing AML/CFT regulations, several shortcomings remain. The FATF recommends that New Zealand strengthen its supervision and enforcement mechanisms, enhance its customer due diligence requirements, and improve its reporting requirements for DNFBPs.