Academic journal article The Reserve Bank of New Zealand Bulletin

Anti-Money Laundering and Countering the Financing of Terrorism-The Reserve Bank's Supervisory Approach

Academic journal article The Reserve Bank of New Zealand Bulletin

Anti-Money Laundering and Countering the Financing of Terrorism-The Reserve Bank's Supervisory Approach

Article excerpt

Introduction

Money laundering is the way criminals disguise the illegal origins of their money. Financers of terrorism use similar techniques to try and avoid detection by authorities and to protect the identity of those providing and receiving money for funding acts of terrorism. Under the Act, the Reserve Bank is one of three supervisors tasked with ensuring firms comply with new obligations designed to help deter and detect money laundering and terrorist financing.

AML/CFT Regime / Environment

During the past 18 months, the regulatory environment with respect to Anti-Money Laundering and Countering Financing of Terrorism ('AML') in New Zealand has developed significantly with the publication of several regulations and guidance. Many key thresholds and exemptions have now been set or clarified and, importantly, the date for full implementation of the Act has now been set as 30 June 2013.

National and Sector Risk Assessments

In March 2011, the NZ Police published a National Risk Assessment ('NRA'). This contains information about money laundering and terrorist financing issues at a national level and from a law enforcement perspective. The three AML supervisors (1) issued their Sector Risk Assessments on 29 March 2011. The Reserve Bank's Sector Risk Assessment complements the information in the NRA and contains the Reserve Bank's preliminary assessment of the level of risk of money laundering and terrorism financing across all the sub-sectors it supervises.

Regulations

On 30 June 2011, four sets of AML regulations were promulgated. These regulations are administered by the Ministry of Justice. The three AML supervisors, along with NZ Customs and the NZ Police, were consulted extensively during the policy development and drafting.

The Anti-Money Laundering and Countering Financing of Terrorism (Definitions) Regulations 2011 specifically include certain financial advisers and trust and company service providers as reporting entities (2) (so that they are subject to the full range of AML requirements); exclude certain entities from the Act (such as lawyers, accountants and government departments); establish thresholds for occasional transactions (3) and beneficial ownership; (4) and provide further detail around designated business groups. (5)

The Anti-Money Laundering and Countering Financing of Terrorism (Exemptions) Regulations 2011 exempt certain transactions and services from the Act or parts of the Act on the basis of their lower money laundering and terrorist financing risk (e.g. currency exchange in hotels; closed insurance policies; loyalty card schemes; low value gift cards).

The Anti-Money Laundering and Countering Financing of Terrorism (Requirements and Compliance) Regulations 2011 contain further detail in order to clarify the extent of certain obligations such as customer due diligence in relation to anonymous accounts; information to be collected about beneficiaries of trusts; and the content of annual reports. (6)

The Anti-Money Laundering and Countering Financing of Terrorism (Ministerial Exemption Form) Regulations 2011 prescribe the form in which the Minister must make Ministerial exemptions

In addition, the Anti-Money Laundering and Countering Financing of Terrorism Act Commencement Order 2011 sets the date by which the Act's requirements will come into effect as 30 June 2013. This planned delay is intended to give industry the opportunity to prepare themselves for compliance with the Act and also to allow AML supervisors time to develop their supervisory programmes.

Codes of practice

The Identity Verification Code of Practice ("the Code") was issued on 1 September 2011. This was issued jointly by the three AML supervisors and applies to all reporting entities across all sectors subject to supervision. The Code provides a suggested best practice for all reporting entities conducting name and date of birth identity verification in respect of customers (that are natural persons) who have been assessed to be low to medium risk. …

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