Phase 2 of NZ’s Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) Act 2009 is well underway, with all lawyers, conveyancers, accountants, bookkeepers and those providing trust and company services now in the compliance fold. Real estate agents will follow from January next year and the NZ Racing Board and high-value dealers from August 2019.Each of these sectors is required by law to have a business risk assessment, as well as policies, procedures and controls in place by their respective deadlines.
The response of individuals in these industries to the new laws vary, but they are generally not favourable. While people understand broadly that they are necessary to keep criminals at bay, the time and cost of compliance is off-putting to those in the sectors who must now toe the AML line.
While the large institutions included in Phase 1 – such as banks, casinos and financial services providers – make provision for combating financial crime as part of the cost of doing business, smaller businesses usually don’t. And hence why they don’t feel happy at having to introduce new roles, policies and procedures to monitor potential criminal activities.
In fact, many small and medium businesses now feel the need to introduce new compliance roles and hire new employees to stay on top of what – without suitable technology and automation – can be a time-consuming manual process.
Cost of implementing AML/CFT regulations could cost NZ $1bn
Earlier this year, Justice Minister Andrew Little told Radio NZ that the cost of implementing the regulations over a 10-year period could be as much as a billion dollars. “The impact of that is to give greater assurance that over $10 billion of cash is clean.” The $10 billion figure refers to the NZ Police Financial Intelligence Unit (FIU) estimate that $1.35 billion of drug and fraud offending is laundered each year in this country.
And, when tax evasion and the proceeds of crimes committed overseas – which are then laundered in New Zealand – are included, the figure at least triples.
The problem in appreciating the need for these AML/ CFT regulations lies partly in New Zealanders’ ‘she’ll be right’ attitude, together with the fact that there isn’t a lot of visibility of how serious the problem is.
Speaking at the recent FIU/ Association of Certified Anti-Money Laundering Specialists (ACAMS) anti-financial crime conference, Graham Gill, General Manager of the Serious Fraud Office (SFO) Evaluation and Intelligence team, says New Zealanders can’t afford to be complacent.
“Although we are number one in the world transparency index, a quarter to a third of New Zealand’s trade is with people who are in the red of the corruption index and who have a willingness to engage in corruption.” He said NZ currently has financial crime prosecutions underway totalling $188 million and added that 51 percent of companies in this country have experienced economic crime in the past two years.
Ordinary New Zealanders up against organised criminal gangs
Speaking at the same conference, Bronwyn Groot, Fraud Education Manager at the Commission for Financial Capability (CFFC) said an estimated 103 million scam emails are sent every minute around the world. On top of this was a deluge of scam phone calls. The message she shared was echoed by other financial crime fighters at the event, who say that the sophistication of these fraudsters is extreme.
Groot said ordinary New Zealanders are up against highly-organised, well-financed criminal gangs running slick operations. “A Kiwi being targeted is not just talking to one person at the end of a phone or email, they're up against a network with the technology to keep one step ahead of law enforcement, and the sophistication to catch anyone.”
To demonstrate just how seriously the problem is being taken at Government level, the NZ Police recently announced the addition of a further 500 police dedicated solely to prevent and combat organised criminal networks and serious offending, in order to reduce crime and harm in communities. This is on top of the further 200 district-based officers focused on preventing serious and organised crime that was recently announced.
And DS Iain Chapman, national manager of the NZ Police’s Financial Crime Group, talked at the conference about how the Crime Prevention Network (CPN) – a public private partnership between Customs, the Police and most of the country’s big banks – is designed to break down information-sharing silos and create a single, national intelligence resource to combat financial crime and money laundering.
The message from this, and other similar events is that New Zealand businesses can’t afford to live in a bubble and believe that financial crimes and terrorism will just pass us by. Legislation exists to create a vacuum that makes it difficult for criminals to operate.
The clear message is: Get on board with anti-money laundering and financial crime efforts, or your business, or employees, will fall prey to these sophisticated criminal networks. By contributing actively to AML/CFT efforts, including complying with legislation and collaborating with others in your industry, you’re minimising your chances of becoming a victim. At the same time, you’re contributing to a greater good that will protect the New Zealand way of life.
Talk to us about how to quickly and easily detect suspicious transactions, fight money laundering, and meet your AML/CFT compliance obligations.