Mutual Evaluation of New Zealand

New Zealand, which is a member of both the FATF and the Asia-Pacific Group on Money Laundering (APG), has recently completed an extensive review of its AML/CFT regime, and the legal framework that underpins it.

The following key findings highlight the progress that has been made by New Zealand since its last mutual evaluation in 2003.

• On 25 June 2009, the Anti-Money Laundering and Countering Financing of Terrorism Bill (AML/CFT Bill) was introduced in Parliament for its first reading. It was referred to Select Committee thereafter and reported back to Parliament on 14 September 2009. The AML/CFT Bill was enacted on 15 October 2009.  
• Between 2004 and 2008, 197 investigation files associated with money laundering were created. Over 75% of the files investigated by the New Zealand Police (NZ Police) over this period related to fraud-associated activity (predominantly Internet-banking fraud). Drug-related activity is the second most investigated offence associated with money laundering (ML), making up 10% of the total ML associated files. Other common predicates were robbery, theft, blackmail, and burglary. 
• Most money laundering occurs through the financial system; however, the complexity usually depends on the sophistication of the offenders involved. There appears to be a higher degree of sophistication in laundering the proceeds of crime now than in previous years. Since 2007, the purchase of real estate, the use of professional services and foreign exchange dealers have been popular means to launder funds. Prior to this, the majority of proceeds of crime were laundered through retail bank accounts. 
• The New Zealand authorities consider the risk of terrorist financing (FT) to be low. This assessment results from the investigation of all suspicious transaction reports (STRs) and suspicious property reports (SPRs) submitted to the financial intelligence unit (FIU) pursuant to the Terrorism Suppression Act (TSA). None of these investigations found any confirmed evidence of FT and, consequently, there have been no prosecutions or convictions for FT in New Zealand.
• The ML offences are largely in line with international requirements, but for a few technical deficiencies. The statistics demonstrate that the offence is being actively enforced. The confiscation regime is generally sound, and is put to frequent and effective use. Confiscation without conviction (civil forfeiture) is not currently available in New Zealand, but is provided for in the Criminal Proceeds (Recovery) Act, which will come into force on 1 December 2009.
• The Ministry of Justice is the lead agency in New Zealand for AML/CFT measures. It is co ordinating and implementing the current AML/CFT review that is being undertaken by the New Zealand Government. New Zealand has adequate and effective mechanisms in place for domestic co ordination and co-operation, both at the policy and operational levels. 
• Overall, New Zealand’s measures relating to criminalisation, provisional measures, confiscation and international co-operation are quite robust. However, compliance with the FATF standards relating to preventive measures for both the financial and designated non-financial businesses and professions (DNFBP) sectors shows a number of essential gaps. Important elements are not addressed in either law, regulation, or other enforceable means. New Zealand’s AML/CFT reforms, which are meant to substantially address these issues, should be implemented as soon as possible.
• Key recommendations made to New Zealand include: continue the initiated reforms of the AML/CFT system; ensure that the AML/CFT Bill currently before Parliament is enacted without undue delay  enabling the introduction of broader preventative measures applicable to all financial institutions and DNFBP; enhance regulation and supervision for AML/CFT purposes; ensure that the competent authorities which are ultimately designated to ensure compliance with AML/CFT requirements are provided with adequate funding, staff and technical resources, and AML/CFT training; introduce licensing requirements and comprehensive ‘fit and proper’ criteria for all financial institutions (not just banks); and introduce effective, proportionate and dissuasive civil or administrative sanctions, applicable to financial institutions and DNFBP, for failure to comply with AML/CFT requirements.

This mutual evaluation was conducted using the FATF Recommendations as published in October 2004, and the 2004 Methodology for Assessing Compliance with the FATF 40 Recommendations and FATF 9 Special Recommendations.