AML/CFT LAW

AML/CFT laws and regulations require businesses to put in place appropriate controls to make it harder for them to be used to launder money, and when they are or suspect they are being used to launder money report it to the authorities.

AML/CFT is also a programme of activity (set out in AML/CFT policies, procedures and controls) designed to manage and/or mitigate the risk that legitimate businesses are being used to launder money generated through illegal activity.

Your AML/CFT programme should be designed to support a business playing its part in preventing, detecting and reporting instances of money laundering and terrorism financing that occur through the legitimate products and services it offers.

There are no hard and fast rules about how money is laundered.  However, money laundering cannot occur without a crime which gives rise to the illegally obtained funds.

Such crimes are called ‘predicate crimes’. Common predicate crimes are drug trafficking, human trafficking, fraud, theft, corruption, and tax evasion.

The techniques used by terrorism financiers are very similar to those used by money launderers, however unlike money laundering the source of funds may be legitimate and their intended use or purpose is illegal.

Targeted Financial Sanctions (TFS) target a country, the trade in specific goods or services with a country or parties within a country. Sanctions regulations also prohibit financial dealings with designated entities or individual citizens of a country.

There are three types of Targeted Financial Sanctions:

• United Nations sanctions issued by the UN Security Council
• Autonomous sanctions issued by a particular country, and
• Countermeasures issued by a particular country.

Sanction regimes are political in nature and are an instrument of foreign policy and economic pressure that can also be currency sensitive, and therefore have extra-territorial considerations and reach.

Sanctions compliance leverages the techniques and controls used for AML/CFT to ensure a business is not undertaking business with sanctioned parties or supporting the trade in goods and services that is prohibited by TFS.

The Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Amendment Act 2017 put in place “Phase 2” of New Zealand’s AML/CFT laws, which:

• Extend the current AML/CFT Act to cover more businesses (including real estate agents and conveyancers; many lawyers and accountants; some businesses that deal in expensive goods; and betting on sports and racing); and
• Make some changes that affect “Phase 1” businesses (including banks, casinos and a range of financial service providers) who have had to comply with the Act since 2013.

The Amendment Act 2017 will come into effect in stages for different sectors to give businesses time to prepare for the changes.

As a Phase 2 business covered by the AML/CFT Act obligations you must:

• Designate someone in your business as an AML/CFT compliance officer;
• Assess and document the money laundering and terrorist financing risks your business may face; and
• Establish an AML/CFT compliance programme setting out how you’ll detect and manage these risks.

On an ongoing basis, you must:

• Verify the identity of customers before providing any service covered by the AML/CFT Act. In some circumstances (such as if they represent a company or trust), you may also need to ask for information about where money came from and the other people involved. For more information about verifying customers’ identities, see: Information for customers about AML/CFT laws;
• Submit a Prescribed Transaction Report to the Police Financial Intelligence Unit (FIU) if a client wants to conduct a transaction in cash that is $10,000 or more, or an international wire transfer of $1000 or more;
• Monitor customers’ accounts to identify potential warning signs of money laundering and terrorism financing. You must report any suspicious transactions or activity to the FIU. For more information, see: Reporting suspicious activities;
• Regularly review your risk assessment and compliance programme;
• Have your risk assessment and compliance programme audited regularly; and
• Submit an annual report to the Department of Internal Affairs, which will supervise your sector.

Some of the changes made by the AML/CFT Amendment Act 2017 also affect Phase 1 businesses (that is, banks, casinos, a range of financial service providers, and some trust and company service providers), these include:

• Reporting more than just suspicious transactions. You now also need to report suspicious activities to the Police Financial Intelligence Unit (FIU).
• Reporting international wire transfers and physical cash transactions above certain amounts (known as “prescribed transactions) to the FIU.

With over 30 years of expert knowledge and real world experience our AML/CFT compliance solutions will help you to navigate your legal and regulatory requirements so that your business complies with its AML/CFT obligations in the fastest and most cost-effective way.

Initialism has a range of AML/CFT solutions to support becoming AML/CFT compliant and maintaining compliance:

• AML Connect – online with automated support
• AML Complete – expert guided workshop support
• AML Consult – one-to-one expert support

Our solutions allow you to tailor support based on your capacity, experience and budget.