WHAT ARE THE
Money laundering and terrorism financing laws in New Zealand?
In New Zealand, money laundering is a serious offence and is regulated primarily under the Anti-Money Laundering and Countering the Financing of Terrorism Act 2009 (AML/CFT Act) and its associated regulations. The AML/CFT Act aims to prevent money laundering (ML) and the financing of terrorism (FT) by establishing a comprehensive framework for enterprise-wide ML/FT risk assessments, reporting, record-keeping, and customer identification.
WHAT ARE THE
Key obligations that reporting entities have under New Zealand law?
The key obligations under the AML/CFT Act include:
- Customer Due Diligence (CDD) - Regulated entities are required to undertake customer due diligence measures to verify the identity of their customers. This involves collecting and verifying information such as name, address, and date of birth. Enhanced due diligence measures are necessary for higher-risk customers, such as politically exposed persons (PEPs).
- Ongoing Customer Due Diligence - Regulated entities must conduct ongoing monitoring of their customer relationships to ensure the information remains up to date and to identify any suspicious activities. This involves periodically reviewing and updating customer records and conducting risk assessments.
- Reporting Suspicious Activities - Regulated entities have an obligation to report any suspicious transactions or activities that may be related to money laundering or the financing of terrorism. They are required to have procedures in place to identify and report suspicious matters to the relevant authority in New Zealand, which is the Financial Intelligence Unit (FIU).
- Record-Keeping - Regulated entities must maintain adequate records of customer identification, transaction details, and CDD measures. These records should be kept for a minimum period as specified by the AML/CFT Act.
- Risk Assessment and Risk-Based Approach - Regulated entities are required to conduct a risk assessment of their business operations and implement a risk-based approach to managing and mitigating money laundering and terrorism financing risks. This includes identifying and assessing the potential risks and implementing appropriate policies, procedures, and controls to mitigate those risks.
- Compliance Program - Regulated entities must establish and maintain a comprehensive AML/CFT compliance program tailored to their business size and risk profile. This program should include policies, procedures, and internal controls to ensure compliance with the AML/CFT Act. It should also designate a compliance officer responsible for overseeing the implementation and maintenance of the program.
- Training and Awareness - Regulated entities are obligated to provide ongoing AML/CFT training to their employees. This training should cover relevant laws, regulations, and internal policies, enabling staff to recognize and report suspicious activities effectively.
- Reporting Large Cash Transactions - Regulated entities are required to report cash transactions that equal or exceed NZD 10,000 (or its equivalent in foreign currency). These reports should be made to the FIU within the specified timeframe.
WHO ARE THE
ML/FT regulators in New Zealand and what functions do they perform?
In New Zealand, there is a multi-agency approach with regulatory oversight for different industry sectors:
- Reserve Bank of New Zealand (RBNZ) - has the responsibility for ensuring compliance with AML/CFT laws by banks, none-bank deposit takers and life insurers in New Zealand.
- Financial Markets Authority (FMA) - has the responsibility for ensuring compliance with AML/CFT laws by financial markets operators including issuers of securities and derivatives, trustee companies, futures dealers, brokers, financial advisers, fund managers and collective investment schemes in New Zealand.
- Department of Internal Affairs (DIA) - has the responsibility for ensuring compliance with AML/CFT laws by casinos, non-bank deposit takers, money changers, designated non-financial businesses and professions (DNFBPs) including lawyers, accountants, real estate agents and other financial institutions not supervised by the RBNZ or FMA in New Zealand.
In addition to these regulatory agencies, the Financial Intelligence Unit (FIU) is a unit within the New Zealand Police force that operates under the Financial Transactions Reporting Act 1996 and is responsible for receiving, analysing, and disseminating financial intelligence related to money laundering, terrorism financing, and other serious financial crimes.
WHAT ARE THE
Industry sectors subject to ML/FT regulations?
In New Zealand, the main industry sectors that are regulated include:
WHAT ARE THE
Penalties for non-compliance with AML/CFT laws in New Zealand?
Under the AML/CFT Act, the penalties for non-compliance can vary depending on the severity of the offence and the specific provisions violated. The types of penalties that can apply include:
- Civil penalties - the regulator may apply to the High Court to order an individual or entity to pay a pecuniary penalty which varies based on the section of the legislation that the breach relates to:
- For a civil liability act specified in section 78(b), (C), (d), or (g), the maximum penalty for an individual is NZD$100,000 and for a body corporate or partnership it is NZD$1,000,000.
- For a civil liability act specified in section 78(a), (da), (e), or (f), the maximum penalty for an individual is NZD$200,000 and for a body corporate or partnership it is NZD $2,000,000.
Civil liability acts cover the fundamentals of the AML/CFT Act and include non-compliance activity such as, failure to adequately monitor accounts and transactions, failure to carry out customer due diligence, failure to adequately monitor accounts and transactions, and failure to implement or maintain an AML/CFT programme. If the entity is considered to be acting knowingly or recklessly, they may also be convicted of a criminal offence and fined up to NZD$5,000,000 if a business, NZD$300,000 if an individual or face up to 2 years in prison.
- Criminal Offences - in serious cases of non-compliance with money laundering and terrorism financing laws can be considered a criminal offence, leading to criminal charges and potential imprisonment. The severity of the penalties can vary based on the offence and may include fines and imprisonment terms.
Regulatory authorities, such as the New Zealand Police and the Department of Internal Affairs, have the power to take enforcement actions against non-compliant individuals or entities. These actions may include formal warnings, issuing infringement notices, imposing conditions on licences, or seeking court orders.
WHAT ARE THE
Largest fines for non-compliance with AML/CFT laws?
New Zealand’s AML/CFT regulators have shown they are willing to take action for non-compliance with AML/CFT laws and has used its enforcement powers extensively across different regulated entities operating in different industry sectors including:
Reserve Bank of New Zealand (RBNZ)
- In 2020, Westpac New Zealand agreed to pay a fine of NZD$3.7 million after admitting to 76 breaches of the AML/CFT Act. The breaches were related to inadequate customer due diligence, ongoing account monitoring, and reporting of suspicious transactions.
Financial Markets Authority (FMA)
- The FMA filed their first proceeding against a business (CLSAP) in June 2020 which resulted in the High Court imposing civil penalties of NZD $770,000 for anti-money laundering breaches.
- FMA also issued a formal warning to Sharesies in August 2020 and warnings were issued to Tiger Brokers as well as six private warnings to unnamed businesses.
- Other fines included: NZD$770k against ANZ Bank New Zealand; NSD$356k against CBL Insurance Limited; NZD$400k against NZ Forex Limited and NZD$356k against Ping An Finance (Group) New Zealand Limited
Department of Internal Affairs (DIA)
- The DIA has also been recently active, taking enforcement action against Qian DuoDuo Limited in May as a result of suspected breaches, and took civil proceedings in July 2020 against two money remitters resulting in $7,585m in penalties.(May 2020)