Anti-Money Laundering and
Countering the Financing of Terrorism

APG ANNUAL MEETING 2006

JURISDICTION REPORT: NEW ZEALAND

Steps taken since July 2005 to implement the international AML/CFT standards

Policy/Co-ordination developments (eg enhancement of national coordinating mechanism, awareness raising workshops etc):

• The Ministry of Justice special development team (FATF Compliance Project team) referred to in the 2005 report is at full capacity. In consultation with FATF inter-agency working group, the team has released and is preparing to release a number of public consultation papers with approval by the Minister responsible for FATF policy:
• The first public consultation document was released in August 2005
• The second, more detailed, consultation document was released on 7 June 2006 addressing the concerns expressed in submissions responding to the first paper
• A third  consultation document (which will propose an AML/CFT regulator and supervisory regime) is expected to be released in August 2006

These consultation papers, together other relevant material, are available on the Ministry of Justice’s public web site at www.justice.govt.nz

• New Zealand’s Pacific Security Coordinating Committee (PSCC) considers a range of security issues including AML/CFT for the Pacific Islands region.  The PSCC has been tasked to develop a whole of Government Pacific Security Strategy.  An interagency process was initiated by the Ministry of Foreign Affairs and Trade (MFAT) for discussing AML/CFT issues related to the Pacific Islands, including possible areas for technical assistance 
• MFAT provides technical legal drafting and consultation assistance to Pacific Island jurisdictions in relation to money laundering and terrorism initiatives

Legislative developments eg new/amended legislation (incl pending):

• Anti-Money Laundering and Anti-Terrorist Financing Bill  

This Bill is expected to be introduced to Parliament in 2007.  It will introduce comprehensive provisions to enhance New Zealand’s compliance with the FATF’s 2003 Recommendations including requirements for greater CDD, record keeping and transaction reporting as well as the establishment of a new regulatory framework to monitor and enforce compliance by financial institutions with internal controls. The framework will permit institutions to adopt a risk-sensitive approach to compliance with FATF standards


• Criminal Proceeds and Instruments Bill

The Criminal Proceeds and Instruments Bill was introduced in Parliament in June 2005 and has a high Government priority with  expected enactment in late 2006/early 2007. The Bill has not yet received first reading and is the subject of amendments to further refine and enhance the forfeiture system it will establish. This Bill will complement the civil forfeiture regime in the Terrorism Suppression Act 2002.

• Crimes (Corruption Offences) Amendment Bill 

Cabinet has approved amending the Crimes Act 1961 to incorporate obligations arising from New Zealand’s signature to the UN Convention Against Corruption. The Bill, to be introduced in Parliament in 2006, will extend the definition of “business” to include the provision of international aid and extend the offence of corruption and bribery currently in the Crimes Act 1961 to include the solicitation of a bribe by a foreign public official.  Bribery is a predicate offence to money-laundering at section 243 of the Crimes Act 1961.

• Terrorism Suppression Amendment Bill 2006

Following a Parliamentary review of the Terrorism Suppression Act in 2005 (with a report on 1 December 2005) Cabinet agreed in April 2006 to extensive amendments to the Terrorism Suppression Act 2002 including an enhanced freezing, seizure and confiscation mechanism for terrorists assets as well as a more robust terrorist designation system for UN and non-UN listed terrorist entities and organisations.  A Bill is being drafted and is expected to be introduced in Parliament in late 2006.

Financial/regulatory developments (eg issuing of Regulations or Guidelines, initiatives in the private sector etc):

• Financial Sector Reviews (2006/2007):
• The Ministry of Economic Development is leading a review of non-bank financial products and providers the objective of which is to develop an effective and consistent framework for the regulation of non-bank financial institutions, financial intermediaries and financial products. FATF standards are incorporated in this review in consultation with the Ministry of Justice FATF Compliance Team. This review builds on the business law reform programme over the last five years and will be informed by the number of separate reviews that are planned or are already being carried out: e.g., the Law Commission's Report on Life Insurance, the Financial Intermediaries Taskforce, the review of credit unions and the review of the Securities Act 1978
• Treasury is leading a review of domestic institutional arrangements primarily around the role of the Reserve Bank of New Zealand.  This review is considering whether the existing domestic regulatory functions for financial sector regulation should be consolidated, possibly into a single organisation, and the appropriate level of cooperation with Australian authorities in financial sector regulation.  Final policy decisions on the appropriate institutional arrangements are expected by late 2006.
• In December 2005 the New Zealand Police FIU completed a revised set of Best Practise Guidelines for financial institutions in relation to the Financial Transactions Reporting Act 1996.  These guidelines have been published on New Zealand Police’s website
• The New Zealand Police FIU has developed and distributed a periodic newsletter to financial institutions containing news and case studies on money laundering activities.  The newsletter is available on New Zealand Police’s website

Law enforcement (eg significant investigations/prosecutions, establishment/enhancement of FIUs, statistics of suspicious transaction reports received, prosecutions, assets seized etc):

Suspicious Transaction Reports

• Between 1 January and 31 December 2005, the New Zealand Police FIU processed 6231 STRs. 
• Between 1 January and 31 May 2006, the New Zealand Police FIU had processed 1873 STRs.

Prosecutions and/or Criminal Charges

• The following tables breakdown prosecution statistics in more detail:

 

Table 1
Number of prosecuted cases involving money laundering offences

Year	Engages in money laundering transaction (s257A(2)/243 Crimes Act)	Obtain/possess property with intent to launder (s257A(3)/243 Crimes Act)	Money laundering with proceeds of drugs
1995	0	0	0
1996	3	1	0
1997	5	2	0
1998	22	2	0
1999	18	2	0
2000	23	13	0
2001	24	8	0
2002	39	3	0
2003	43	2	0
2004	25	2	2
2005	22	3	3

Notes:
1.   Many cases involved multiple money laundering charges.  The 28 cases shown in the table involved a total of 193 charges.
2.   Figures are provisional for 2005.
3.   Source: Research & Evaluation Unit, Ministry of Justice (7 June 2006).

• 
  

  Table 2

  Number of cases resulting in convictions involving money laundering offences

   

  Year	Engages in money laundering transaction s 257A(2)/s 243(2)  Crimes Act 1961	Obtain/possess property with intent to launder s257A(3)/ s 243(3) Crimes Act 1961	Money laundering with proceeds of drugs
  1995	0	0	0
  1996	3	0	0
  1997	2	0	0
  1998	11	1	0
  1999	11	1	0
  2000	13	1	0
  2001	11	0	0
  2002	15	0	0
  2003	13	0	0
  2004	8	1	0
  2005	10	2	1

  Notes:

  • Many cases involved multiple money laundering charges.  The 13 cases shown in the table involved a total of 38 charges.

  2.   Figures are provisional for 2005.
  3.   Source: Research & Evaluation Unit, Ministry of Justice (7 June 2006).

   

  Restrained, forfeited, and realised property

  • The following table outlines restrained, forfeited and realised property seized from 2000 to 2005 pursuant to the Proceeds of Crimes Act 1991 by fiscal year (1 July to 30 June):

   

  Table 3
  Seizures/Confiscation Related to Money Laundering by financial year

  Restrained / Forfeited Property	No. of Cases	Value of Property (VP) / Value Realised (VR)
  01/07/1999 – 30/06/2000
  Restrained Property	2	(VP) $1,895,000
  01/07/2000 – 30/06/2001
  Restrained Property	3	(VP) $1,396,000
  Forfeited Property – not yet realised	2	(VP) $126,995
  Forfeited Property – realised	5	(VR) $1,077,068
  01/07/2001 – 30/06/2002
  Restrained Property	10	(VP) $2,264,798
  Forfeited Property – not yet realised	2	(VP) $455,000
  Forfeited Property – realised	2	(VR) $205,048
  01/07/2002 – 30/06/2003
  Restrained Property	11	(VP) $3,609,535
  Forfeited Property – not yet realised	10	(VP) $1,200,000
  Forfeited Property – realised	2	(VR) $160,964
  Pecuniary Penalty Orders – paid	10	(VR) $2,685,789
  01/07/2003 – 30/06/2004
  Restrained Property	30	(VP) $8,862,404
  Forfeited Property – not yet realised	3	(VP) $555,000
  Forfeited Property – realised	19	(VR) $2,217,556
  Pecuniary penalty Orders – paid	6	(VR) $876,320
  01/07/2004 – 30/06/2005
  Restrained Property	30	(VP) $8,118,081
  Forfeited Property – not yet realised	5	(VP) $1,270,000
  Forfeited Property – realised	10	(VR) $599,900
  Pecuniary Penalty Orders – paid	4	(VR) $654,077

  • Between 1 June 2005 and 31 March 2006, 29 property restraining orders under the Proceeds of Crimes Act 1991 were issued nationally.  The total monetary value of property seized was NZ$10,233,327.

  International co-operation developments (eg ratification of treaties/instruments, mutual legal assistance, extradition)

  • New Zealand can provide mutual legal assistance in criminal cases and extradition on an ad hoc basis without the need for bilateral treaties.  The Crown Law Office has continued to provide a considerable amount of assistance over the past year through its role as Central Authority under New Zealand’s Mutual Assistance in Criminal Matters Act 1992.  Informal assistance is also given by New Zealand Police through Interpol channels 
  • In April 2006, New Zealand signed a treaty with China on mutual legal assistance which provides a simplified legal framework for both countries to request and receive assistance from the other in matters such as the taking of evidence in court, the execution of search warrants, and the recovery and forfeiture of proceeds of crime

  Training, technical assistance and capacity building initiatives

  Brief description of assistance provided or received during the past 12 months:

  • The New Zealand Police FIU has provided assistance to numerous international FIUs and law enforcement agencies over the last 12 months through either the Egmont Group or Interpol
  • The New Zealand Police FIU provided a three week training attachment to the Fijian FIU between 22 August and 9 September 2005.  This training attachment provided the Fijian FIU with "hands on" experience with the day-to-day running of an FIU
  • New Zealand hosted the 2006 International Workshop on Terrorist Financing in April.  This workshop was attended by delegates from Australia, England, Canada, United States and New Zealand
  • The New Zealand Police FIU has provided a mentor/facilitator to the Australian Anti-Money Laundering Assistance Team to assist with its FIU workshop for Pacific Island countries that was held in Sydney between 5 and 9 June 2006
  • Since late 2005, New Zealand has provided Nauru, Samoa and Tuvalu with technical legal consulting assistance to facilitate completion of UN reporting requirements under Security Council Resolutions 1267, 1373 and 1540. This assistance is expected to be provided to other jurisdictions in the coming year 
  • In 2005/06 New Zealand has provided technical legal drafting assistance to Pacific Island jurisdictions to implement regional model legislation relating to counter terrorism
  • New Zealand hosted meetings of the Pacific Forum’s Working Group on Counter-Terrorism in June 2005 and April 2006.  The Working Group covers a wide range of counter-terrorism related matters, including AML/CFT issues
  • New Zealand also led the development of the Pacific Forum’s first ever counter-terrorism contingency planning exercise (Exercise READY PASIFIKA), the scenarios for which included an AML/CFT element.  The tabletop phase of the exercise was held in Fiji in November 2005 and a follow-up and next-steps meeting was held in New Zealand in April 2006
  • From 21 to 25 November 2005, New Zealand’s Official Assignee organised and hosted an International Proceeds of Crime Administrators, Trustees and Enforcers Conference.  During the conference, delegates heard from a wide range of speakers who are acknowledged as experts in their respective fields.  Delegates also agreed on further collective activity in the form of a Proceeds of Crime Liaison Forum, which would enable participating agencies to share information, assist with training, and develop and maintain cross-border assistance policies

  Brief description of assistance required during the next 12 months

  • Nil

  Other capacity building initiatives

  • The New Zealand FIU is in the process of developing an electronic database that will expand its capacity and allow it to receive and manage STRs electronically.  This database, expected to be completed by June 2007, will significantly improve the FIU’s ability to produce statistical information 
  • New Zealand is exploring the potential to develop a Pacific Regional Identity Protection Project under the auspices of the Pacific Islands Forum
  • From October 2006, New Zealand will be funding (through the Pacific Security Fund) a legal drafter, based at the Forum Secretariat in Suva, to spend 18 months working on a range of international legal compliance issues, including in the security area. It is envisaged that this legal drafter will devote considerable time to AML/CFT issues
    

  APG Typologies – methods and trends

  • Statistics on the number of suspicious or unusual transaction reports filed; Money laundering cases (investigations); Prosecutions and/or criminal charges; Seizures / confiscation related to money laundering.
  • Refer section 1(d) of this document.

  Examples /case studies /reports of current money laundering and terrorism financing methods:

  • New Zealand continues to see the following methods of money-laundering occurring:
  • Currency exchanges/cash conversion
  • Use of credit cards, cheques, promissory notes etc
  • Purchase of portable valuable commodities (gems, precious metals etc)
  • Purchase of valuable assets (real estate, race horses, vehicle, etc)
  • Underground banking/alternative remittance services
  • Gambling activities (use of casinos, horse racing, internet gambling etc)
  • Abuse of non-profit organisations
  • Co-mingling (business investment)
  • Use of nominees, trusts, family members or third parties
  • Use of professional services or “gatekeepers” (lawyers, accountants, brokers etc).
  • No terrorist financing activity has been detected in New Zealand in the past year 

  c) Information /case studies of significant trends identified:

  • New Zealand is starting to see the increased use of non-bank financial institutions in the laundering process. Suspicious transaction reporting from professional intermediaries/gatekeepers is increasing.  This is due to the number of prosecutions for breaching suspicious transaction reporting obligations and the continuing education of this sector of its vulnerability to money laundering

  d) Research or studies undertaken on money laundering methods and trends:

  • The New Zealand Police chair the APG Typologies Working Group which has been tasked with researching and producing the Annual APG Typologies Report on methods and trends occurring within the region.
  • The New Zealand Police FIU is in the process of finalising a strategic assessment on money laundering enforcement and initiating a strategic assessment on terrorist financing vulnerabilities in New Zealand
    

  4. Other AML/CFT measures

  • The New Zealand Police FIU conducts an annual Financial Crimes and Money Laundering course attended by Police, public sector agencies and financial institutions. Money laundering and proceeds of crime trends and typologies are examined and discussed in detail during this course and the information gathered is subsequently disseminated to affected industry and the wider public

  5. Future priorities/planned initiatives

  • As indicated in the 2005 jurisdiction report, budget 2004 provided $14.8 million over the next four years to allow 35 additional Police to boost New Zealand's counter-terrorism capacity.  The majority (24 sworn and 5 non-sworn staff) will go to units that will conduct investigative and intelligence-related work. An identity fraud team and a South and West Pacific Police liaison post in Suva has been established
  • The Government also announced in 2006 that New Zealand Police resources would be significantly bolstered by an additional 1,000 front-line sworn staff and 250 non-sworn staff. The allocation of additional staff numbers to anti-money laundering and counter terrorist financing projects  has yet to be decided 
  • The Government's Pacific Security Fund received a further $12 million over four years in Budget 2004.  It has funded a range of Pacific security activities including several of the AML/CFT initiatives noted above

  Source: Official Assignee.

  Statistics on Pecuniary Penalty Orders are not readily available prior to this time.

  Source: Official Assignee.

   

  FATF Inter-Agency Working Group
  c/o Ministry of Justice
  Crime Prevention and Criminal Justice Group
  14th Floor
  Charles Fergusson Building
  Wellington
  NEW ZEALAND
  Tel: 644-918-8800

   

  15 June 2006

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  Footnotes

  1 Source: Official Assignee.

  2 Source: Ministry of Economic Development Proceeds of Crime report, April 2005.