By Gary Hughes*
The first week of May is already gone. That means only a few working days remain before New Zealand’s bold experiment with outlawing large cash transactions comes into force.
This significant but largely unpublicised law change takes effect on Thursday, May 11, and will have the effect of preventing any business that regularly deals in certain specified commodities from buying or selling them for cash in future.
A few long-established Kiwi traditions may be consigned to the past, such as young folk saving up wages for an engagement ring with which to propose, or buying a car in cash to ensure you can take possession and drive it home immediately. At least, that is, if your intended purchase is NZ$10,000 or more.
What’s no longer permitted?
Ten grand is the threshold set in law now, at which point certain cash transactions move from being considered unusually large (and therefore currently reportable under Anti-Money Laundering law) to banned outright. That list of certain products covers: jewellery and watches, gold and silver or other precious metals, diamonds and sapphires or precious stones, motor vehicles including motorcycles (not mopeds/scooters), and all yachts and boats.
The various categories of goods on the newly-banned list are those where trading and consumer habits may have commonly used cash over the years. But equally, they are the high risk areas where criminal cash, under the table tax avoidance, or gang money laundering may have flourished too.
These new prohibitions have largely snuck up through the back door as part of significant organised crime group (anti-gang) reforms rushed through Parliament at the end of last year.
That resulted in the grandly named Criminal Activity Intervention Legislation Act 2023 being passed in April.
One effect of this is an amendment to the Anti-Money Laundering & Countering Financing of Terrorism Act 2009 prohibiting persons “in trade” from buying or selling in cash articles in one or more of those categories, if the total value of the transaction is equal to or above $10,000. Or if a series of related transactions reaches that threshold value.
“In trade” is a term used in other areas of law, such as the Fair Trading Act. It will tend to focus on dealers carrying on a business, not one-off or private or irregular backyard sales. Dealers in trade must not only refrain from buying or selling these articles by way of cash transactions (as it will be a civil liability breach to conduct such a transaction), but potentially face a criminal offence too. That might carry penalties up to two years in prison or a $300,000 fine (for individuals) or up to $5 million (companies & partnerships) - on a strict liability basis, regardless of intention or knowledge.
Why is this happening?
It’s hard to disagree with the thrust of law changes that attack organised crime groups, especially on the back of rising gun crime and methamphetamine markets that are proving more resilient than housing markets. Meth in New Zealand was estimated by Ministry/Police officials to be a $300m industry in 2021.
Drug dealers have a propensity for cash, and vehicles, toys, and bling. Working in a cash- intensive illegal area, they seek to transfer and revolve the cash it generates into readily movable assets.
As a result, law enforcement agencies here and abroad have held a growing animosity towards cash transactions in recent years. Australia kicked around a similar proposal to restrict cash a few years ago, but it did not proceed. A few scattered nations, such as Malta and Jamaica, have banned large cash transactions. But the need for a sweeping set of updated anti-gang laws provided an opportunity for government agencies to accelerate what is now a novel Kiwi experiment.
Many of these traders were already captured for AML purposes as reporting entities, because they are high-value goods dealers who transact in larger sums of cash. However they were given only a very limited set of obligations under the AML laws from August 2019 (as explained below) and it appears those obligations can only be now seen as a failure.
Despite positive intentions, the process adopted by Parliament was disappointing. A draft bill moving at pace in December, extremely short select committee consideration, and industry consultation processes being bypassed - altogether, often a recipe for poor law-making.
The few submitters who managed to engage in time raised reasonable questions about whether transaction privacy or Bill of Rights Act freedoms were being unduly trampled upon, and how this all fits with other stated aims like improving the problems around de-banking and financial exclusion. Answers were not readily forthcoming.
Nevertheless, without fanfare or effective consultation, the law was changed as part of the rapid anti-gang package.
Making part of AML law redundant?
When some high value dealers came under AML/CFT coverage for the first time, regulators were aware there were a very large number of new reporting entities. As a significant compromise, those dealers were given much reduced legal obligations. Compared to a financial institution or bank, casino or law firm, they did not have to create an AML compliance programme or risk assessment, or have a compliance officer, or need to make mandatory suspicious activity reports to police. That was only voluntary.
There’s been no data to reliably show whether since 2019 many car dealers and yacht brokers were in fact making voluntary reports.
At the same time, many of them may have remained ignorant of the AML law change, and many do not need to be registered or licensed in any financial sense. So as the Ministry departmental reports now make clear:
“the supervisor (the Department of Internal Affairs) is required to expend substantial effort to determine whether a potential business should be supervised, which means that non-compliant high-value dealers can escape attention and that supervising the sector is more resource intensive than it otherwise could be. The amendments that the Bill makes to the Act means that there will be less resource-intensive investigations that need to occur.”
In other words, adding a large number of new AML reporting entities with only voluntary compliance processes has been too difficult to regulate. So now the lever has moved firmly to the other end. The core of the problem – acceptance of large cash sales – is now illegal and banned outright. If you can’t by law do it, you will no longer need be regulated for the money laundering risk of it.
Those outside the cash ban categories, who will be left in the AML net, are a much smaller group – mostly dealers and auction houses handling art, antiques or protected objects and artefacts.
*Gary Hughes is a leading regulatory barrister at Britomart Chambers, and Chair of the International Bar Association AML & Sanctions Experts committee.
65 Comments
The core of the problem – acceptance of large cash sales – is now illegal and banned outright. If you can’t by law do it, you will no longer need be regulated for the money laundering risk of it.
The core of the problem is not the money laundering, it is the crime that creates the dirty money.
Go after the crime, as we can already see that going after the cash doesn't stem the flow of money from illicit activities whatsoever, in fact it will more likely create more violence for those trying to launder it by creating criminal debts.
While some may argue that this will help, others will see this as removing the ability of the public to use their hard earned legal tender to purchase goods and services how they wish, as a lax excuse while they fail miserably on the core problem of the crime that is creating this issue.
How does it stop people using their how they want, you still can buy what ever you want just pay by EFTPOS. Who in there right mind would carry more than $10,000 in cash around, I would be completely freaked out.
What needs to change in this cashless society is that a bank account should be considered a right, a bank should not be able to deny you one as long as you provide adequate identification. No more you terminating your account because went bankrupt, or credit checks before you open one. That should be reserved for lending only.
Also there should be a way do large amounts via EFTPOS, maybe prearrange them with your bank, or 2 factor authenticate transactions over a limit.
That won't be the default limit, at some point you would have had to ask to have the limit raised (Assuming its a personal acct, not a business acct). Default limits for online payments for personal accts seem to vary from $2k to $10k IME, but can be raised usually with nothing more than a phone call needed.
Money laundering, and I assume tax evasion is the states business, as long as there are laws in place that they can't just access your accounts without a warrant I am fine with that.
What I am saying is the vast majority of such transaction are probably dubious. The only good reasons I can see for doing so is laundering money, or evading tax. I cannot think of one that cannot be done electronically much easier and safer for all concerned.
Just because you can't see a reason for someone wanting to deal in cash doesn't mean reasons don't exist, i.e. the state and banks having too much control over law abiding peoples lives. Observe examples like Russia, where the state can basically make you a "non person" by confiscating all electronic documentation and removing bank balances of people not wanting their innards smeared over a foreign landscape. COVID is an example of an all powerful state being able to treat individuals as state vassals. Even if you didn't mind the state's actions in removing rights, including over your physical self, it is an example of the increasing slope towards absolute control!
https://www.theguardian.com/world/2023/apr/12/russia-military-conscript…
"Men who fail to show up at the draft office will be banned from travelling abroad, their driving licences will be invalidated and they will be unable to register small businesses." Although not just limited to these freedoms.
As far as preventing "money laundering", it'll do no such thing. As we slide into a world controlled by AI, the complexity of amoral activities will simply increase in tandem!
Personally I have no trust in a system that is hell bent on destroying the life support systems of the planet and has proven no desire, or ability to change course! Protesting against the machine is increasingly risking non personhood. It gets worse from here!
https://www.rnz.co.nz/news/national/488871/kiwi-climate-activist-given-…
The Canadian government froze the bank accounts of striking truckers a year or so ago - people who were protesting.
Theres no justification for increased state surveillance of private property including peoples finances.
"Saying you don't care about privacy because you have nothing to hide is like saying you don't care about free speech because you have nothing to say." Edward Snowden
No justification? We should scrap all tax laws then as there is no point trying to level the field? For example...I made about a gazillion dollars less than dumpster trash trump but I paid more income taxes than him every year for the last 20 odd years....why, because I am not a crook or a thief.
And you quote a traitor who sold sensitive information..FOR MONEY..how ironic
Except that banks have pressured the Governments over the years to essentially allow them to take over the day to day monetary system, and that requires having a bank account. Try doing almost anything without one? But a bank could still refuse to allow you to have an account? That would be grounds to take them to task. I agree they are private business's but they have positioned themselves in such a way that some of the options they might otherwise have, have become somewhat tenuous and open to challenge.
"Who in their right mind would carry more than $10,000 in cash around".
It's reasonably common in other countries, especially parts of Asia.
I've been taken out and entertained at night by customers in Hong Kong with $10k in their pocket. A good restaurant, a club or two afterwards, girls......bang it's gone.
Everyone thinks so small in this country. In other places $10k is just a good night out for a couple of people.
Going after the cash is trying to make sure that crime doesn't pay to disincentivize further crime BUT MORE IMPORTANTLY, the less crime pays the less ability there is for crime to corrupt our insitutions. It is very important to make sure there is as little money in crime as possible, lest we end up like e.g. Italy.
We have lobbyists in our politicians ears and going back and fourth between Govt and lobbying companies, exerting influence that benefits them and not the public. One could easily see there is an aspect of corruption at play already, yet to be better explored by the media. No cash is involved, just 'donations' and face to face time with the most influential people in NZ.
Government entities just cant stand the fact they cant see the transactions. Daily limits on cash withdrawals will reduce slowly over time. Incentives to use Digital dollars in apps will be high. Its so convenient!
Uh oh it looks like you owe more tax or bought something from some one with a low social credit score, now your score is lowered! We better investigate you as you triggered a suspicious alert on the AI analytics!
Hugh Hendry in Bloomie interview on Fri. Highly relevant.
“Sometimes it’s kind of relevant to panic. I would recommend you panic… You’ve seen the biggest waterfall decline in M2 right now. M2 is deposits, not loans. That’s the deposits fleeing the system and going into money market funds.
That could reach a crescendo where the Treasury and the Fed may have to come in and actually restrict your right as a US citizen to pull money out of the US banking sector.”
“There is capital flight, deposit flight from the banking sector seeking yield. I fear that, I don’t say this lightly, but in 1934 the Federal Reserve Act confiscated gold from US citizens.
We’re at the point where the Fed and Treasury officials I’m sure are having to consider a gate a lock on US bank deposits.”
“It’s time to own the most reviled security in the universe, the ultra long Treasuries. I know you all think we’ve got an inflation problem. It was a supply shock, and a supply shock needs the manifestation of more and more bank printing of loans to propel it into the future. We’re getting the opposite. The ultra longs are trading two to three standard deviations below the ETF…
I’ve not got the bug, but Bitcoin is something I could conceive as an asset class that could trade three or four times higher in the next five years. There is no other asset class that I could make that determination.”
Only thing that makes me wonder about Hendry's advice is that on his most recent appearance (https://youtu.be/UWhlPBsl63M?t=1216) he says that he "owes the banks a lot of money" (start at 20:18). So wouldn't this imply that with interest rates as high as they are, he would be being hit pretty hard by the need to pay interest payments that could meaningfully impact the credibility of his takes?
NZ / Aussie banks have yet to behave differently. Give it time.
When debt is 4x the size of the economy, the system can only really operate when rates are closer to zero.
In the U.S., regional banks need to increase deposit rates, even if that means taking losses. Depositor flight to money markets will screw them.
Of course you'll say "but it's diffrunt here."
And you are kind of right.
But you're not.
Its always been hard to get large amounts of cash out anyway. You had all sorts of excuses from them not having it on hand to questions about what you are going to spend it on ! The banks simply hate giving you cash, its like they think you are going to get mugged the second you walk out the door. I don't see it changing anything, people with large amounts of cash keep it out of circulation for various activities or have acquired large amounts over time.
Is this just the start. A limited application that affects few people and can be sold as "anti crime".
Then once people get used to the idea reduce the limit further to affect a few more people so people get used to hearing stories about cash not being accepted for xyz.
Then change the narrative to "we don't really need cash because everyone is used to buying big things without it" and they remove cash all together.
We already have banks checking how many coffee people buy before approving loans, where will this end once there is no way to complete anonomous transactions.
Correct. Far too many over-arching long term agendas at play globally at the moment, and this may be one of them. People don't want the government in their wallets any more than they already are, let alone their private affairs which they seem to want to get more and more involved in. So spend in cash, there's no transaction fees, the value of a note stays the value of a note for the businesses you hand it to, and it always comes in handy for anything needed to purchase. Saves businesses fees paid to card companies, feels good having something material you can quantify and also feels real handing it over and getting something else back.
"Money is a tool for trading human time. Central banks, the modern-era masters of money, wield this tool as a weapon to steal time and inflict wealth inequality. History shows us that the corruption of monetary systems leads to moral decay, social collapse, and slavery. As the temptation to manipulate money has always proven to be too strong for mankind to resist, the only antidote for this poison is an incorruptible money."
https://breedlove22.substack.com/p/masters-and-slaves-of-money?utm_sour…
“How does this not violate the principle of legal tender, does it mean cash is no longer legal tender?
"Legal tender is a tender of payment that, by law, cannot effectively be refused in settlement of a debt denominated in the same currency."
It doesn’t matter, if someone doesn’t want your cash then there is nothing you can do, they choose to trade how they want, if it is a bags of rocks they want then it is a bag of rocks you need to give them in order to exchange for their goods or else no deal.
They can refuse to sell you goods, but they can't refuse settlement of a debt or contract in cash.
Or at least they can, but if they do they can't pursue you in court for payment later.
https://www.rbnz.govt.nz/-/media/7379ca7af5fc4748acc0d1eaa25edd65.ashx?…
NZ: $10,000 now.....BUT
As per the official website of "Banque De France", 1,000 euros is the maximum cash payment that can be made by individuals resident in France for tax purposes, or for professional activity. Foreigners $10,000 Euro.
From September onwards, people who live in France will not be allowed to make payments of more than 1,000 euros ($1,060) in cash, down from 3,000 now. The cap for foreign visitors, left higher for reasons that include facilitating tourism, will be cut to 10,000 euros from 15,000.
https://www.reuters.com/article/us-france-security-financing-idUSKBN0ME…
Spain is the same 1000 euro. CONTROL OF THE PEASANTS
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