The position of New Zealand in the Panama Papers has sparked heated debate in New Zealand, if not worldwide. There is a belief in some regions that multinational offenders are using New Zealand corporate mechanisms and funds to hide their operations and resources from watchful eyes. On the other hand, New Zealand has a solid anti-money laundering (AML) and counter-terrorist funding (CFT) regime that is in line with global standards and is expected to be expanded further soon.
New Zealand and FATF
New Zealand is a member of the Financial Action Task Force (FATF), an international organization founded in 1989 to establish global guidelines and participate in the fight against money laundering and terrorist financing.
The FATF publishes a guideline for member countries to follow, comprising 40 specified guidelines. This includes monitoring illegal transactions, making details about the beneficial ownership and management of legal entities readily available to appropriate authorities, and providing mutual legal aid to other countries in issues relating to money laundering (ML) and terrorist financing (TF).
The FATF and the Asia-Pacific Group on Money Laundering released a mutual assessment report in October 2009, evaluating New Zealand's commitment to FATF guidelines. As a result, New Zealand received a 'non-compliant' rating in various categories, including due diligence mechanisms, internal controls and regulatory practices in financial institutions, and overall AML/CFT oversight and supervision. Consequently, New Zealand has been put on a routine follow-up monitoring protocol.
The 2009 paper, on the other hand, was released only one day after New Zealand's Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act), which had been drafted to resolve all of these issues. Any of the previously reported concerns were regarded as sufficiently determined by the October 2013 follow-up study. Except for the requirement to show proof of compliance and oversight, all central FATF guidelines were either compliant or partly compliant. Although the FATF mentioned that the lack of implementation in these areas was largely attributed to a lack of adequate evidence, given that the Act had only been completely implemented three months previously, the study eventually concluded that New Zealand had taken sufficient steps to warrant its exclusion from the normal follow-up process and was considered to be mostly in line with FATF standards.
New Zealand's AML/CFT Policy
New Zealand published a regulatory document to combat money laundering and terrorist financing. To fight ML-TF, New Zealand released a regulatory guide. The Anti-Money Laundering and Counter-Terrorism Financing Act of 2009 (AML/CFT Act) sets a range of requirements on "reporting agencies," which presently include financial advisors, casinos, and trust and business service providers. In addition, customers, advantageous holders of customers, and anybody transacting on behalf of a consumer are all subject to the Act's due diligence requirements.
This due diligence is supposed to be conducted using a "standard," "simplified," or "enriched" protocol based on considerations such as whether the client lives in a country with "inadequate" anti-money laundering protocols and whether the planned transaction is exceptionally large or has no clear legal intent. Customers' transactions must also be monitored daily to ensure that they are compliant with the entity's view of their market and risk profile. Cardinal transactions must be reported to the Commissioner of Police. Each monitoring entity's appraisal program must be independently verified every two years.
According to the Act, the Department of Internal Affairs is responsible for casinos and money changers. The Reserve Bank of New Zealand is responsible for banks and insurance, and the Financial Markets Authority is responsible for financial service providers. Supervisors are also responsible for checking the reporting bodies under their control, developing codes of conduct for their industry that aid in regulatory enforcement, and ensuring compliance.
New Zealand is proud of its reputation as one of the world's least corrupt nations. The latest Panama Papers reports have damaged the reputation significantly, claiming that New Zealand trusts and offshore firms are appealing to despots and gangsters.
The Financial Action Task Force's Report
According to the FATF study released in April 2021, New Zealand has put some proactive steps to combat ML and TF, but weaknesses still have to be addressed.
New Zealand's reforms are "delivering good results," according to the Financial Action Task Force. Still, the country needs to increase advantageous ownership accountability, enhance oversight of some industries monitoring irregular transactions, and properly monitor compliance with financial sanctions to avoid terrorist financing.
According to the paper, the Reserve Bank's AML-CTF banking sector management should be expanded in size and depth. According to the evaluation, New Zealand has successfully combated criminal finances since participating in fighting organized crime.
The FATF appreciated many elements of New Zealand's AML/CFT protocols. For example, according to the paper, the country's law enforcement authorities routinely use financial intelligence to track alleged illegal transactions, investigate and prosecute fraud, and retrieve the proceeds of crime.
New Zealand also needs to monitor those industries, such as lawyers, accountants, and real estate brokers, who have recently been placed under the country's AML measures and must now set up procedures and mechanisms to combat AML/ CFT, according to the organization.
After implementing steps to reduce risks relating to businesses and limited partnerships in recent years, the FATF proposed that New Zealand increase the clarity and availability of correct and existing valid beneficial ownership details of companies, such as limited liability companies and corporations, which can be used to launder dirty money.
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