The Government will shift New Zealand's anti-money laundering oversight to a single supervisor model from the current three supervisor model, and introduce an industry-levy to fund it, Associate Justice Minister Nicole McKee says.
The Department of Internal Affairs (DIA) will become the sole Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act supervisor, with the Reserve Bank (RBNZ) and Financial Markets Authority (FMA) to be stripped of their AML/CFT supervisory roles.
"The Government will also introduce a new sustainable funding model for the AML/CFT system as part of the reforms. The funding model will establish an industry-levy to support a flexible and coordinated system that will deliver sector benefits. The levy will be designed to ensure that costs are equitable and reasonable for the sector and will not place undue burden on small businesses," McKee says.
Currently AML/CFT Act supervisors receive funding via the Government. ACT Party MP McKee told interest.co.nz in May that AML/CFT Act reform was one of her priorities this parliamentary term. However, questions have been asked as to whether DIA is up to the challenge.
"An AML/CFT National Strategy and work programme will be introduced as part of the funding model. Legislation will require any amendments to the levy to be informed by the National Strategy and work programme," says McKee.
"This work programme will be developed in partnership with industry and agreed by Cabinet to ensure that the AML/CFT system is focused on industry priorities. The new funding model will mean better and more efficient regulation, supervision, and support for industry."
"The changes will ensure New Zealand maintains its international reputation and will align our AML/CFT system with the financial sectors of our key trading partners to support trade, investment and economic growth," adds McKee.
She says the Government is very aware of the risks money-laundering and financing of terrorism pose to NZ. Moving to a single supervisor will improve the efficiency of the system, establish a more risk-based approach, and enable more timely provision of guidance and support, McKee says.
Australia has a single supervisory model via AUSTRAC, or the Australian Transaction Reports and Analysis Centre. It's the Australian government financial intelligence agency responsible for monitoring financial transactions to identify money laundering, organised crime, tax evasion, welfare fraud and terrorism financing.
The Australian Government is only now, however, moving to drag lawyers, accountants and real estate agents under the AML/CFT umbrella, something NZ did in 2018019.
Under the current NZ supervisory regime, established when the AML/CFT Act took effect in 2013, the DIA covers casinos, non-deposit-taking lenders, money changers and reporting entities not covered by the other supervisors. The RBNZ supervises banks, life insurers, and non-bank deposit takers. And the FMA supervises issuers of securities, licensed supervisors, derivatives issuers, managed investment scheme managers, client money or property service providers, equity crowdfunding platforms, peer-to-peer lending providers, discretionary investment management services and certain financial advice providers.
NZ lawyers and conveyancers have had to comply with the AML/CFT Act since July 2018, accountants since October 2018, real estate agents since January 2019, and high volume goods dealers and the NZ Racing Board, which administers sports and racing betting, since August 2019. All are supervised by the DIA.
6 Comments
One industry impacted is the illegal drugs chain. The consumer buys from a seller, who is supplied by a wholesaler, who buys from a manufacturer or importer. Compare this chain to buying a coffee on the way to work. Now think about how the coffee money is “traced” through the system. As an accountant, if my coffee seller has disproportionate income to costs, I am put on notice. If put on notice, perhaps I will conclude to file a suspicious transaction report? It would need to be something extraordinary. And relies on my skills to detect. But if under thresholds, the Bank will likely not have interest. Perhaps IR systems will flag the taxpayer? Never seen them do that. Back to the dark side, how many cases have we seen reported of successful detection of ML? How is this AML compliance regime anything other than a tick box activity, that is designed to create the appearance of doing something, but deliberately designed not to be able to detect and deter the substance? Show me the last Banker, lawyer, accountant (the enablers) who were prosecuted and had their homes seized under proceeds of crime? A few Maori gang members caught just points to systematic discrimination. Not that I feel strongly about this….
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