Money laundering, funding terrorist organisations and other financial crimes cause serious issues all over the world – and New Zealand is no exception. Globally, the Financial Action Task Force (FATF) – established over 30 years ago – acts as the overarching watchdog for this type of criminal activity, setting international standards for more than 200 countries and jurisdictions. Here in New Zealand, the Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT) was established to manage our response to global FATF guidelines.
Since the Act came into force in 2013, what has it meant for businesses and how does it work to fight financial crime?
What is the objective of the AML/CFT Act?
The Act detects and deters money laundering and the financing of terrorism with the help of compliance from businesses. It ensures that New Zealand adheres to recommendations issued by FATF and that the New Zealand public can remain confident in our financial system.
What businesses need to comply with the Act?
Initially, the Act covered financial institutions, banks, casinos and specific trust and company service providers. However, in August 2017, an amendment was made to cover a broader range of organisations, including real estate agents, conveyancers, lawyers, accountants and businesses that deal in expensive goods or betting on sports and racing.
How does it work?
The Act requires businesses within its scope (reporting entities) to comply with basic obligations. The aim is to reduce the risk of a business being unwittingly used to facilitate criminal activity and to help identify and stem the flow of this activity in New Zealand.
What are the basic obligations, and how do they help?
Although some businesses may need stricter procedures, every reporting entity must follow the basic AML/CFT requirements.
Overall risk assessment
Businesses are required to complete a thorough risk assessment to identify key areas of vulnerability. This includes looking at the size, nature, and complexity of the business and the types of customers or countries it works with. A thorough risk assessment creates awareness of any weaknesses within a business and provides a framework for a robust AML/CFT programme.
The AML/CFT programme
Based on a thorough risk assessment, the AML/CFT programme needs to cover procedures, policies and controls to help detect, manage and mitigate the risks identified.
Customer due diligence (CDD)
Businesses must carry out specific measures to identify and verify each customer’s identity. This assures businesses that customers are who they say they are and helps pick up any red flags before engaging in a relationship.
Suspicious activity reporting (SAR)
Businesses are required to report any suspicious activity to the Financial Intelligence Unit (a specialist unit within the New Zealand Police). This ensures concerns are quickly followed up and action is taken if necessary.
An annual report must be filed that covers risk assessment and the business’s AML/CFT programme.
The Act is only as successful as its participants
While New Zealand’s AML/CFT legislation is undoubtedly necessary – not just for deterring and identifying criminal activity, but for global compliance and reputation – it can only be as successful as its participants.
Although the Act came into force in July 2013 and amendments in 2017, many businesses are still coming to grips with compliance requirements – or whether they need to comply at all. If you’re struggling with compliance, spending too much time managing your programme or you’re just not sure where to start, First AML can help. With our specialist advice, you can understand your obligations and our automated AML software simplifies the compliance process.
About First AML
First AML streamlines the entire anti-money laundering onboarding and compliance process. Backed by real expertise, its cloud-based KYC Passport allows complex entities to share their verification across multiple companies and geographies, at their discretion.
Making an otherwise complex and manual onboarding process simple for clients and cost effective and compliant for businesses, First AML delivers efficiency and time savings, protecting reputations, and enabling companies to be on the right side of history in the face of global threats.