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AML/CFT Overview Criminal Law Team Criminal Justice Group.

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Presentation on theme: "AML/CFT Overview Criminal Law Team Criminal Justice Group."— Presentation transcript:

1 AML/CFT Overview Criminal Law Team Criminal Justice Group

2 2 Scale of the problem: Money laundering in New Zealand AML/CFT overview - September Police estimate that roughly $1.5 billion of criminal proceeds is laundered in New Zealand annually The combined profit from methamphetamine and cannabis sales is estimated to be between $1.4 billion and $2.2 billion per annum Over 77,000 charges were laid in 2009 for serious offences that had the potential to be predicate offences for money laundering Source: 2010 National Risk Assessment

3 3 Money laundering Most crime in New Zealand is financially motivated While not all crime involves organised groups, a significant amount of crime involves organised criminal activity (typically involving drug manufacturing, prostitution and robbery). The current AML/CFT regime seeks to “flush out” the illegal proceeds of crime It adds transparency to certain financial transactions in order to detect crime and to prevent illegal proceeds from being reinvested in criminal conduct. AML/CFT overview - September

4 4 The money laundering process AML/CFT overview - September Serious crime (eg, drug- related offending, fraud) Proceeds of crimePlacementLayeringIntegration

5 5 The money laundering process AML/CFT overview - September Serious crime (eg, drug- related offending, fraud) Proceeds of crimePlacementLayeringIntegration AML risks for NGOs to bear in mind

6 6 The money laundering process AML/CFT overview - September Serious crime (eg, drug- related offending, fraud) Proceeds of crimePlacementLayeringIntegration AML/CFT regime: Customer due diligence and suspicious transaction reports

7 7 AML/CFT overview - September 2014 AML/CFT is about systems for following the money trail to detect serious crimes 7 Customers and clients provide information about themselves. The amount of information is dependent on risks posed by the situation. Reporting entities, must assess risks, collect information, keep records, monitor transactions, report suspicious transactions Financial intelligence unit in Police analyses suspicious transaction reports and disseminates intelligence products to law enforcement in NZ and abroad

8 8 The AML/CFT Act AML/CFT Act came into force on 30 June 2013 Obligations are placed on reporting entities (financial institutions and casinos): AML/CFT risk assessment and compliance programme identify customers and verify identity keep records monitor accounts report suspicious transactions to the Police AML/CFT overview - September

9 9 The AML/CFT Act – 1 year on AML/CFT overview - September There has been an increase in the number of STRs…

10 10 The AML/CFT Act – 1 year on AML/CFT overview - September …and in the quality of STRs:

11 11 AML/CFT overview - September 2014 Compliance is supervised by Government agencies 11 Reserve Bank supervises banks, non- bank deposit takers and insurers Financial Markets Authority supervises the securities sector and financial advisers Department of Internal Affairs supervises casinos, money remitters, and trust and company service providers Customs monitors cross-border cash movement and reports cash reports

12 12 Why have AML/CFT obligations – International context Financial Action Task Force 40 recommendations drives international AML/CFT compliance NZ currently serving as the co-chair of the Asia Pacific Group on Money Laundering ( ) NZ’s international reputation will affect its bid to be a member of the UN Security Council (Security Council Resolution No 1617) UN Convention Against Trans-National Organised Crime International Convention for the Suppression of Financing of Terrorism AML/CFT overview - September

13 13 The FATF recommendations for AML/CFT AML/CFT overview - September Legal framework is in place At least 20 serious crimes are predicate offences and offences are enforced Countries have extradition and mutual legal assistance frameworks and are effectively engaged in international and domestic interagency cooperation Money laundering is criminalised Proceeds of crime can be confiscated Terrorism financing is criminalised and rapid responses to terrorism are available Corporate and financial frameworks are in place Legal persons are transparent Financial sectors are regulated; banks, securities, insurers Risky sectors are supervised for AML/CFT Financial sector covered Non-financial businesses including lawyers, accountants, real estate agents, not-for-profits are considered for coverage

14 14 Why have AML/CFT obligations – International context Robust AML/CFT measures help to maintain NZ’s reputation as a trusted trading partner NZ’s FATF rating has a direct impact on international trade NZ was dropped from the European Union “White List” in 2012 for perceived weaknesses in AML/CFT regime International participation provides NZ with direct access to best practice, emerging trends and forms basis on domestic enforcement. AML/CFT overview - September

15 15 Why have AML/CFT obligations – Domestic Context Analysis has shown that overall crime levels can be reduced by improving AML/CFT policies: Help to detect offending, supporting effective investigation and prosecution of crime Support the proceeds of crime regime to seize illegally obtained money and prevent it from being funnelled back into criminal activity Deter potential criminals from illegal behaviour by removing the incentives, and therefore lowers the crime rate Support the tax regime, helping to detect and prosecute tax evasion. AML/CFT overview - September

16 16 Case studies 2009: SP Trading Ltd, NZ shell company used to traffic arms from North Korea 2012: Falcona Systems Ltd, NZ shell company involved in laundering over US$150 million derived from fraud by Ukrainian and Latvian officials AML/CFT overview - September

17 17 The Organised Crime and Anti-Corruption Legislation Bill The Organised Crime and Anti-corruption Legislation Bill is part of the Government’s All of Government Response to Organised Crime to combat calculated, profit motivated, serious offending. Introduced into Parliament in June 2014 Gives law enforcement agencies in New Zealand the power to deal with organised crime and corruption, should it occur. Ensures New Zealand complies with international obligations, improving our ability to support global efforts to tackle serious crimes. AML/CFT overview - September

18 18 The Organised Crime and Anti-Corruption Legislation Bill Key new measures: Requiring banks to report all international transfers of $1,000 or more and all physical cash transactions of $10,000 or more to the FIU Redrafting the money laundering offence to specify that intent to conceal is not required Introducing new offences to address identity crime, including selling or passing on identity information Amending the people trafficking offence so that it applies to such activity in New Zealand, not just when victims are moved in or out of this country AML/CFT overview - September

19 19 The Organised Crime and Anti-Corruption Legislation Bill Key new measures (cont): Amending the Policing Act 2008 to expressly provide Police with a power to share information with its international counterparts Revising the foreign bribery offence, including clarifying the circumstances in which a corporation is liable for foreign bribery Increasing penalties for bribery and corruption in the private sector to bring them into line with public sector bribery offences AML/CFT overview - September

20 20 The Organised Crime and Anti-Corruption Legislation Bill Reporting international transfers and physical cash transactions: Does not affect CDD already required of customers Banks and other financial institutions already required to conduct CDD and collect identity info for wire transfers and physical cash transactions over threshold Amendments mean that banks will be required to forward what they already collect to the FIU Should have no practical effect on customers who currently conduct transactions over threshold AML/CFT overview - September

21 21 The Organised Crime and Anti-Corruption Legislation Bill Reporting international transfers and physical cash transactions (cont): Amendment responds to specific FATF recommendation, which requires threshold to be set no higher than 1,000/10,000 EU/USD Threshold of 1,000/10,000 NZD chosen to provide certainty against currency fluctuation Consistent with similar regime in Canada More lenient that comparable regime in Australia – currently all international funds transfers reported regardless of amount AML/CFT overview - September

22 22 The Organised Crime and Anti-Corruption Legislation Bill Removing the intent to conceal: Intent to conceal has never been an express legislative requirement Early case law on money laundering read this requirement into the money laundering offence This amendment clarifies the original legislative intent NZ has been criticised international for this perceived deficiency in the courts’ interpretation of the offence The amendment brings the law back into step with international best practice and NZ’s obligations AML/CFT overview - September

23 23 Questions? Contact: AML/CFT overview - September


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