Anti-Money Laundering and
Countering the Financing of Terrorism

APG ANNUAL MEETING 2005

JURISDICTION REPORT: NEW ZEALAND

1. Anti-money laundering/countering the financing of terrorism (AML/CFT) measures introduced since June 2004

(a) Policy/Co-ordination developments (eg establishment/enhancement of national coordinating mechanism):

• In 2004/05 Cabinet agreed to the following legislative changes:

1. A comprehensive monitoring framework will be put in place to ensure all financial institutions meet standards for countering money laundering and terrorist financing;
2. Persons providing money transfer or currency change services will be subject to a registration regime;
3. Statutory requirements for financial institutions to comply with customer due diligence, and to implement internal anti-money laundering systems and procedures. Detailed obligations will be set out in an enforceable code of practice;
4. Financial institutions will be required to obtain, verify and retain information concerning the identity of the originator of wire transfers through an amendment to the Financial Transactions Reporting Act 1996;
5. The practicability of directors and senior managers of financial institutions in the insurance and securities sectors being evaluated to ensure that they meet the 'fit and proper persons' criteria, which would bring them into line with the banking sector is being evaluated.

• In May 2005, the Government funded the establishment of a Ministry of Justice special development team to undertake policy development, oversee implementation and monitor the effectiveness of FATF Standards in New Zealand. This team has started its work and will build further capacity in the coming months.
• The New Zealand FATF inter-agency working group, comprised of representatives from the Ministries of Justice, Foreign Affairs and Trade, Economic Development, the Reserve Bank, Inland Revenue, Customs and Police continues to examine options for New Zealand’s compliance with the FATF 40+9 recommendations.
• New Zealand’s Pacific Security Coordinating Committee (PSCC) considers a range of security issues, including AML/CFT, for the Pacific Islands region. In September 2004, the PSCC was tasked with developing a Whole of Government Pacific Security Strategy. This strategy is periodically updated. An interagency process was initiated by the Ministry of Foreign Affairs and Trade for discussing AML/CFT issues related to the Pacific Islands, including possible areas for technical assistance.

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

• Terrorism Suppression Amendment Act 2005

Passed in June 2005, this Act addresses the deficiency in the Terrorism Suppression Act 2002 identified in the FATF/APG MER with respect to the financing of terrorism. It criminalises the financing of terrorist entities and complements the existing terrorist financing offences at ss 8 to 10. This additional offence is automatically an extraditable offence for the purposes of the Extradition Act 1999 and ensures greater cooperation with other jurisdictions through the principle of dual criminality. The Act also extends the designations of the current list of terrorist entities to a period of two years following the report to Parliament of the Foreign Affairs, Defence and Trade Committee’s review of the operation of the Terrorism Suppression Act 2002 (see paragraph 5).

• Charities Act 2005

This Act was passed in 2005 and creates a Charities Commission that is responsible for oversight of the charities sector. The Commission maintains a register of charitable organisations and registered charities which are required to submit an annual report to the Commission. Registration with the Commission will not be mandatory; however, charities that choose not to register will not be eligible for tax exemptions. This measure reflects the government’s commitment, among other things, to comply with SR VIII.

• Border Security Act 2004

Passed in July 2004, this Act makes significant amendments to the Customs and Excise Act 1996 and the Immigration Act 1987 all of which enhance New Zealand border security. For instance, the Act permits customs officers, among other things, to detain property at the border that is suspected to be the proceeds of crime.

• Criminal Proceeds and Instruments Bill

The Criminal Proceeds and Instruments Bill was introduced in Parliament in June 2005. It will repeal the current conviction-based Proceeds of Crime Act 1991 and establish a new civil forfeiture regime together with an enhanced conviction-based system. This Bill will complement the civil forfeiture regime in the Terrorism Suppression Act 2002 for designated terrorist entities by extending civil forfeitures to non-designated terrorist entities and to other forms of criminal activity including money laundering.

• Crimes Act (United Nations Convention Against Corruption) Amendment Bill

Cabinet has recently approved amending the Crimes Act 1961 to incorporate obligations arising from New Zealand’s signature to the UN Convention Against Corruption. The Bill, due 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 s 243 of the Crimes Act 1961.

• Financial Transactions Reporting Amendment Bill

To be introduced in Parliament in 2006, Cabinet approval for drafting this Bill was received late in 2004. It will amend the Financial Transactions Reporting Act 1996 relating to wire transfers (SR VII) and cash couriers (SR IX) issues. Policy work is underway to action these approvals.

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

• Financial Sector Review (2005/2006):

1. MED is leading a review of non-bank financial products and providers. The key objective is to develop an effective and consistent framework for the regulation of non-bank financial institutions, financial intermediaries and financial products. FATF standards will be incorporated in this review. This framework is intended to encourage confidence and participation in financial markets by investors and institutions, and result in a sound and efficient non-bank financial sector;
2. The review is essentially a stock take of current regulation and an evaluation of whether that regulation needs to be improved.  Financial markets are dynamic and the regulatory system needs to provide for this. The review will build on the business law reform programme the Government has undertaken 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;
3. Treasury will lead work on the how the financial regulatory regime can best be administered, including whether any changes to the existing domestic regulatory institutional structure are needed.  This work will take into account any recommendations from the Review of Financial Products and Providers, particularly the extent of additional regulation recommended and the role of bodies such as trustee companies and statutory supervisors.  This work will also consider whether the existing domestic regulatory functions for financial sector regulation should be consolidated, possibly into a single organisation, and the appropriate level with Australian in financial sector regulation.  Final policy decisions on the appropriate institutional arrangements are expected by late 2006.

• The New Zealand Banker’s Association has adopted a variety of guidelines for banks relating to wire transfers:

1. For cross-border transfers, message format SWIFT MT 103 carries the originator information;
2. For cross-border wire transfers with a domestic leg, MT 103’s through the SCP system carry the originator information for large-value SWIFT-based payments;
3. For wholly domestic transfers, MT 103’s through the SCP carry the originator information for large-value SWIFT-based payments; for smaller-value retail interchange transfers, current message formats do not include full originator information but compliance with SR VII can be achieved as originator’s information is available within 3 days.

• Government officials have also held discussions with other wire transfer operators and representatives of payment switches to ensure that financial institutions conducting wire transfers are able to comply with SR VII on a voluntary basis until the above-mentioned amendments to the Financial Transactions Reporting Act 1996 have been enacted by Parliament.
• The New Zealand Police FIU has completed a revised set of Best Practise Guidelines for financial institutions in relation to the Financial Transactions Reporting Act 1996. These guidelines are before the Privacy Commissioner and will be published on-line at the beginning of July 2005
• The New Zealand Police FIU is currently developing a newsletter that will be made available on-line to financial institutions. The newsletter will discuss current domestic and international trends in money laundering activity and discuss any legislative changes.

(d) 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 2004, the New Zealand Police FIU processed 6,758 STRs. This was a significant increase in the number of processed STRs compared to the 2003 figure of 3,152.
• Between 1 January and 31 May 2005, the New Zealand Police FIU had processed 3,033 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

Notes :

1. Many cases involved multiple money laundering charges. The 239 cases shown in the table involved a total of 459 charges.
2. Source: Research & Evaluation Unit, Ministry of Justice (15 June 2005).

Table 2: Number of cases resulting in convictions involving money laundering offences

Notes :

1. Many cases involved multiple money laundering charges. The 91 cases shown in the table involved a total of 172 charges.
2. Source: Research & Evaluation Unit, Ministry of Justice (15 June 2005).

Restrained, forfeited, and realised property

• The following table outlines restrained, forfeited and realised property seized from 2000 to 2004 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 [1]

• Between 1 June 2004 and 31 March 2005, 29 property restraining orders under the Proceeds of Crimes Act 1991 were issued nationally. The total monetary value of property seized was NZ$7,883,821. [2]

(e) 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 addition to formal agreements, New Zealand recently entered into a Memorandum of Understanding on Counter Terrorism with the Government of Fiji that includes provisions covering cooperation.

2 Training, technical assistance and capacity building initiatives

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

• The New Zealand Police FIU successfully sponsored the Cook Island FIU through candidacy for membership of the Egmont Group of FIUs.
• 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 hosted the China Anti-Money Laundering Monitoring and Analysis Centre (CAMLMAC). The meeting discussed how the New Zealand FIU operated and future co-operation between the two FIUs.
• The New Zealand Police FIU ran the annual Financial Crimes and Money Laundering Course that was attended by Police, public sector agencies and financial institutions. At this course the trends and typologies of money laundering and proceeds of crime are examined and discussed in detail.
• New Zealand sponsored a FIU workshop for the Cook Islands, which brought together stakeholders from the range of New Zealand Government agencies and Cook Islands Government agencies as well as industry.
• New Zealand is providing legislative drafting assistance for Niue on AML/CFT, and is assisting Niue to draft a new Companies Act to facilitate the closure of Niue’s Offshore Finance Centre.
• New Zealand has worked with Pacific Island countries on the implementation of the Nasonini Declaration which was adopted at the 2002 Pacific Island Forum and relates to the development of a regional framework, including model legislation, to address terrorism and trans-national organised crime. New Zealand participated in an Expert Working Group established by the Forum Secretariat which prepared model legislation to implement the 12 anti-terrorism conventions, UNSC Resolution 1373, and the Convention on Transnational Organised Crime and its Protocols. Pacific Island countries are now able to request in-country drafting assistance from either a NZ or Australian funded drafter to incorporate these model provisions. New Zealand has provided such drafting assistance to the Cook Islands and Tonga and expects to assist Niue in June 2005.
• New Zealand has recently offered assistance to Pacific Island countries to help them meet their reporting obligations under United Nations Security Council Resolutions 1267, 1373 and 1540.
• New Zealand provided funding via the New Zealand Agency for International Development (NZAID) for the Technical Adviser to the Cook Islands FIU. The Technical Adviser was then appointed head of the FIU, as a Cook Islands civil servant. New Zealand provided top-up funding for her remuneration until June 2005.
• At the request of the Cook Islands government, New Zealand provided advice and assistance regarding possible candidates for membership of the Board of the Cook Islands Financial Supervisory Commission, to contribute overseas financial sector and regulatory authority experience to the Board.
• New Zealand hosted the Forum Regional Security Committee (FRSC) meeting in June 2005, which discussed, inter alia, AML/CFT issues and technical assistance needs, and coordination processes within the Pacific Islands Forum membership and with donors.
• New Zealand hosted a Pacific Forum Working Group on Counter-Terrorism on 13 June 2005 and a High-Level Planning Session for a Pacific Forum Counter-Terrorism Contingency-Planning Exercise on 17-18 June 2005 in Auckland. The concept of a Working Group was initially agreed at the Pacific Roundtable on Counter-Terrorism (PRCT) hosted by New Zealand in May 2004, as a mechanism whereby Pacific Forum countries could gather and discuss progress made in complying with the international counter-terrorism agenda, new issues arising and challenges the Pacific faced. This inaugural meeting of the Working Group focused on three key themes:

1. Follow-up actions to the May 2004 PRCT;
2. International and regional counter-terrorism developments of relevance; and
3. New regional challenges.

• New Zealand introduced a compilation of key international counter-terrorism documents it had produced for Pacific Forum members and a semi-regular newsletter, updating Forum members on recent international and regional counter-terrorism developments.
• The High-Level Planning Session (HLPS) was the initial planning stage of the first ever Pacific Forum-wide counter-terrorism contingency planning exercise. The actual tabletop exercise will take place in Fiji in November 2005, and is designed to improve the Pacific’s ability to plan for and respond to a terrorist incident. The concept of a Pacific counter-terrorist exercise was first raised by New Zealand Prime Minister Helen Clark in May 2004 and was subsequently endorsed by the Pacific Forum’s Regional Security Committee. New Zealand provided funding to assist attendance at the HLPS by Forum members and East Timor. At the HLPS, senior officials from Forum states endorsed proposed thematic areas that would be tested during the November tabletop exercise, including one related to possible money laundering and terrorist financing in the region.

(b) Brief description of assistance required during the next 12 months –

• Nil 

(c) Other capacity building initiatives

• The New Zealand FIU is in the process of developing a database that will be able to receive and manage STRs electronically.
• New Zealand will explore the potential to develop a Pacific Regional Identity Protection Project under the auspices of the Pacific Islands Forum.

3. APG Typologies – methods and trends

a) 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. 

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

• New Zealand continues to see similar methods of money-laundering occurring such as, the purchasing of luxury items, purchasing of companies to mingle the proceeds of crime with legitimate funds and the use of gambling activities.
• No terrorism financing activity has been identified 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. For example, the use of professional intermediaries/gatekeepers continues to be seen and the reporting of suspicious transactions from this sector is on the increase. This is due to the number of prosecutions for breaching suspicious transaction reporting obligations and the continuing education of this sector to its vulnerability to money laundering. 

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

• The New Zealand Police FIU is a co-chair of 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.

4. Other AML/CFT measures

• The New Zealand Police FIU runs an annual Financial Crimes and Money Laundering course that is attended by Police, Public Sector Agencies and Financial Institutions. At this course, the trends and typologies of Money Laundering and Proceeds of Crime are examined and discussed in detail.

5. Future priorities/planned initiatives

• The Government has announced that New Zealand's counter-terrorism capacity is to be boosted by the formation of dedicated national security teams. Budget 2004 provides $14.8 million over the next four years to allow 35 additional Police to be deployed for specific national security duties during the current financial year. 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 will also be established.
• The government's Pacific Security Fund, which was set up in 2003, 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.
• The Foreign Affairs Defence and Trade Select Committee is currently reviewing the operation of the Terrorism Suppression Act 2002 (by virtue of section 70) and is required to report back to Parliament by 1 December 2005. The review includes examining terrorism offences, the civil forfeiture provisions relating to designated terrorist entities, extradition and the terrorist designation procedure. The government will examine the content of the Committee’s report carefully and may propose policy initiatives based upon it.

FATF Inter-Agency Working Group
c/o Ministry of Justice
Charles Fergusson Building
Wellington
New Zealand

22 June 2005

Footnotes

1 Source: Official Assignee.

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