New Zealand’s Banking Industry Faces Challenges in Financial Crime Prevention
A Mixed Assessment: Progress Made, but Room for Improvement
A recent report by the Financial Action Task Force (FATF) and the Asia-Pacific Group on Money Laundering (APG) has evaluated New Zealand’s anti-money laundering and counter-terrorist financing measures. The assessment highlights both positive developments and areas of concern in the country’s banking industry.
Key Findings
- Effective use of financial intelligence: New Zealand’s banking industry has been successful in using financial intelligence and investigation tools to support money laundering investigations and prosecutions.
- Non-financial sector still developing: Measures to prevent money laundering in the non-financial sector are still evolving, and businesses need to better understand and mitigate their risks.
- Supervision of the banking sector needs improvement: Greater resourcing is required for effective supervision of the banking sector, and there is scope to improve the use of sanctions.
Beneficial Ownership Transparency: A Concern
The FATF report highlights concerns around beneficial ownership transparency in New Zealand. The country still lacks adequate mechanisms to identify and track the true owners of companies. Loopholes regarding nominee directors and shareholders could undermine efforts to mitigate money laundering risks associated with legal persons and arrangements.
Gaps in Terrorist Financing Risk Mitigation
New Zealand’s authorities have been praised for their response to terrorist financing risks, particularly following the Christchurch attack in 2019. However, the report found gaps in the implementation of targeted financial sanctions measures, which are critical in preventing the flow of funds to designated terrorists and terrorist organizations.
Recommendations for Improvement
To address these concerns, it is essential that New Zealand’s banking industry continues to improve its oversight and transparency practices. This includes:
- Enhancing beneficial ownership transparency mechanisms
- Improving supervision of the banking sector
- Strengthening sanctions and enforcement measures
- Educating businesses on money laundering risks and mitigation strategies