What Is Anti-Money Laundering & Terrorist Financing

Apr 12, 2022

Money laundering is a process that criminals use to ‘clean’ their money that they make from dealing in illegal matters, fraud, and tax evasion. They do this by making their money look like it comes from a legitimate source where they cover their tracks to avoid detection. Each year about $1.35 billion from the proceeds of fraud and illegal drugs is laundered through everyday New Zealand businesses.

Why do we need to protect New Zealand from Money laundering and terrorist financing activities?

It is vital to protect and enhance the reputation of individual businesses, of New Zealand as a safe place in which to do business to help safeguard the integrity of our economy.

Aotearoa, New Zealand is part of the Global Community, that is why, it is important that we protect our borders internationally and locally from money laundering and terrorist financing activities.

What do you need to know about the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT)

The AML/CFT regime came into force in 2009 and replaced the Financial Reporting Act 1996 as the Country’s primary legislation for ensuring New Zealand meets its international obligations with respect to combating criminal financing.

Unlike its predecessor, which imposed obligations on an entity based on its status as a financial institution, the AML/CFT is activities based. This means that the entity’s obligations under the Act are also determined by its activities.

The AML and CFT Act 2009 was implemented to detect and deter money laundering and the financing of terrorism and to maintain and enhance New Zealand’s international reputation by adopting, where appropriate in the New Zealand Context, recommendations issued by the Financial Action Task force; and to contribute to public confidence.

From July 1, 2018 ‘Suspicious activity’ is now included in the Act, previously only suspicious transactions were to be reported.

Are you a reporting entity?

There is a list of reporting entities that can be found on the website Department of Internal Affairs website under AML/CFT Reporting Entities.

The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act) places obligations on New Zealand’s financial institutions, casinos, virtual assets service providers, accountants, lawyers, conveyancers and high value dealers to detect and deter money laundering and terrorism financing.

Businesses that appear on this list have been identified as reporting entities, supervised by the Department of Internal Affairs, under section 5 of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (the Act). Businesses that do not appear on this list but do meet the definition of reporting entity under the Act will be subject to the obligations created by that Act. ​

What your obligations are as a reporting entity, to comply with the (AML/CFT)?

Section 5 of the AML/CFT is what you need.

A reporting entity must establish, implement and maintain a compliance programme that includes internal procedures, policies and controls to –

  1. Detect money laundering and the financing of terrorism and
  2. Manage and mitigate the risk of money laundering and financing of terrorism

A reporting entity must-

  1. Designate an employee as an AML/CFT compliance officer to administer and maintain its AML/CFT programme.
  2. In the case of a reporting entity that does not have employees, the reporting entity must appoint a person to act as the AML/CFT compliance officer.
  3. The AML/CFT compliance officer must report to a senior manager of the reporting entity.

As a reporting entity, you must report suspicious transactions or activities to the Financial intelligence unit within a three day time period. The reporting entity must also prepare an annual report on its risk assessment and AML/CFT programme.

What are our obligations to ensure you comply with (AML/CFT)?

From 1 July 2018, all lawyers are required to comply with the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT). Under this legislation we may need to gather more information from you before providing services. This may include asking for photo identification and proof of address.

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