new zealand | anti money laundering (aaron lloyd)
TRANSCRIPT
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Anti-Money Laundering and Countering the Financing of Terrorism
Aaron Lloyd, Minter Ellison Rudd WattsAuckland, 14 March 2013
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Agenda
• What is money laundering?• What is financing of terrorism?• International framework• New Zealand framework
• Our new regime?• How the new regime works
• AML/CFT for the non AML/CFT regulator• Importance of registry information• Interplay with other white collar compliance risks
• Conclusions
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What is Money Laundering?
• A transaction that involves converting ‘dirty’ money into ‘clean’ money, for example via• Cash conversion – currency exchanges• International money transfers• “Structuring” – break down transactions into non-
reportable transactions• “Smurfing” – is where several people used to deposit
cash• Purchases of vehicles and equipment, property etc• Market trading
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What is Money Laundering?
• Money laundering is comprised of three stages
• Placement – placing the illegal or “dirty” funds into the financial system
• Layering - Converting the unlawfully gained assets into other forms and creating complex layers with the intent of breaking the audit trail and hiding the amount of money involved . This stage makes it difficult to trace the true source and ownerships of the assets.
• Integration – investing the money into legal businesses or investments – the money can now not be traced to its criminal origin. Money is now “clean.”
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What is Money Laundering?
• Money laundering in New Zealand• The top three money laundering mechanisms in New Zealand are
wire transfers, purchase of valuable assets and purchase of valuable commodities (Financial Intelligence Unit New Zealand Police National Risk Assessment for AML/CFT).
• Core criminal offences• Offence under section 243 Crimes Act 1961
• Concealing proceeds of a serious offence (i.e. 5 years jail)
• Offence under section12B Misuse of Drugs Act 1975
• Concealing proceeds of a serious drug offence
• Act overseas which if committed in NZ would be an offence under the above
• Knowledge or recklessness mens rea
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What is Financing of Terrorism?
• A person will be financing terrorism if they provide or collect funds intending or knowing that
• they be used in full or in part to carry out 1 or more acts that, if they were carried out, would be a “terrorist act”; or
• they will benefit, an entity that the person knows is an entity that carries out, or participates in the carrying out of “terrorist acts”
• Caught even if providing funding generally and not for a specific terrorist act
• Does require actual intent or knowledge, not recklessness – but knowledge can just be of the acts done, not required to know they amount to a “terrorist act”
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What is Financing of Terrorism?
• Terrorist Acts• an act for purpose of ideological, political or religious cause
• to induce terror in civilian population; or• to force a government, or international organisation to do or abstain
from any act
• an act against specified terrorism conventions e.g.• unlawful seizure of aircraft • unlawful taking of hostages • unlawful acts against safety of maritime navigation• unlawful acts against safety of fixed platforms on continental shelf
• terrorist act in an in an armed conflict • New Zealand anti-terror legislation has a very wide potential
reach – including into activist funding.• Unlike UK law, no clear provision for funding approval
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International framework
• FATF – Financial Action Task Force
• Inter-governmental body developing and promoting policies to combat money laundering and terrorist financing.
• “The FATF 40 +8” – Forty internationally endorsed global standards against money laundering and terrorist financing, plus 8 additional recommendations.
• Current iteration – February 2012
AML/CFT Policies and Co-ordinationCreating offences & confiscation regimesTerrorist financing offencesPreventative measuresTransparency & beneficial ownershipRegulation, Supervision and EnforcementInternational co-operation
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New Zealand framework
• New Zealand has lagged behind internationally recommendations on AML & CFT
• Financial Transactions Reporting Act 1996
• Mutual evaluation reports identify New Zealand as internationally non-compliant
• Anti-Money Laundering and Countering Financing of Terrorism Act 2009 designed to bring NZ up to speed
• Full implementation June 2013
• New regime much more complex and thorough than old regime
• New offences
• Requirement for compliance programmes, compliance officers, risk assessments, transaction monitoring
• Increased customer due diligence (CDD) requirements
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New AML/CFT laws (NZ)
AML / CFT Act
Regulations Codes of practice Guidance Material
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Who is covered by the AML/CFT regime?
• The regime only applies to “reporting entities”. Initially this means:• Financial Institutions - activity based definition
• e.g. banks, non bank deposit takers (NBDTs), lenders, trustee companies, securities issuers, collective investment schemes, insurance companies, share brokers, fund managers, financial advisers
• Casinos
• Others to be added in approx 3 – 4 years e.g. lawyers, accountants, real estate agents, pawnbrokers
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AML/CFT supervisors
• 3 supervisors:• Reserve Bank• Financial Markets Authority• Department of Internal Affairs
• No Single AUSTRAC Equivalent (Australia)• Involvement by other entities including:
• Financial Intelligence Unit (FIU) from Police• AML/CFT National Co-ordination Committee• Customs• Ministry of Justice
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How the new regime works: key obligations under the AML/CFT Act
• Obligations• Ongoing Compliance Programme and Monitoring• AML/CFT Compliance Officer• Customer Due Diligence (“CDD”)• Reporting of Suspicious Transactions• Detailed Record Keeping Requirements• Cross border transportation of cash
• Offences• Money laundering and terrorist financing (already discussed)• Failure to comply with requirements of further obligations
above
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How the new regime works: customer due diligence (CDD)
• The type of CDD that will apply will depend on the type of customers and the way in which reporting entities establish customer relations• normal• simplified• enhanced
• Must generally conduct on:• customers• beneficial owner of a customer• any person acting on behalf
of a customer
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AML/CFT for the non-AML/CFT regulator
• How does an increase focus on AML/CFT impact on a non-AML/CFT regulator?
• I suggest it does so in two main ways• Data integrity – critical that data which you are
responsible for maintaining is accurate and can be relied on by other regulators and end users
• Companies Office Database• Financial Service Providers Database
• Inter-play with other white collar risks
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Interplay with other white collar compliance risks• FATCA
• US legislation designed to force foreign financial institutions (FFIs) to disclose their US account holders
• Operates by imposing 30% withholding on payments• In NZ, will most likely apply via an Inter Governmental
Agreement (IGA)• IGA will align FATCA more with FATF concepts but
will apply to FFIs even if no US assets• Requires additional KYC/CDD over AML/CFT
requirements• Will require inter-agency cooperation and
information sharing
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Interplay with other white collar compliance risks
• Sanctions• Complex sanctions obligations: UN, domestic
legislation, consider foreign restrictions (eg. US)• Regulatory and commercial considerations• KYC/CDD• Terrorist financing risk tie-ins
• entity lists• activities (risk flags for further KYC/CDD)
• If serious enforcement contemplated, requiresinter-agency cooperation
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Interplay with other white collar compliance risks
• Anti-bribery & corruption• Current law Crimes Act 1961• Domestic and foreign bribery• Increased international focus on foreign bribery• FCPA and UK Bribery Act compliance • “Prevention of bribery”• Anticipating the strengthening of NZ laws• Overlap = compliance training, risk assessment• Requires international and inter-agency cooperation
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Conclusions
• AML/CFT is the “latest” in a long line of criminalisation of corporate misconduct
• Even if your agency is not directly involved, it plays an important role through• Integrity of data• Inter-play of white collar criminal detection and
enforcement• Stopping the financial flow is the new way of
combating crime and terrorism
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LEFT TO RIGHT
Aaron Lloyd Partner T +64 9 353 9971 M +64 21 532 000
Lloyd Kavanagh Partner T +64 9 353 9976 M +64 21 786 172
Karen Mace Senior Associate T +64 4 498 5106 M +64 21 221 7513
Minter Ellison Rudd WattsAML/CFT Team contacts