Anti-Money Laundering and
Countering the Financing of Terrorism

Submissions on the third discussion document (Supervisory Framework)

Trustee Corporations Association of New Zealand

December 2006

Introduction

This submission relates to the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Third Discussion Document published by Ministry of Justice in October 2006.

Development of Supervisory Framework

Trustee Corporations Association (TCA) supports the proposal that regulation of financial institutions for the purposes of FATF requirements be dealt with through the Review of Financial Products and Providers (RFPP) currently underway and led by the Ministry of Economic Development (MED).

TCA supports the proposed functions and powers of supervisors for the purpose of implementing FATF requirements provided that those functions are undertaken and those powers exercised in accordance with the risk based approach to supervision outlined in the AML/CFT Second Discussion Document.

Preferred Supervisory Model

TCA supports the second option supervisory model - multiple AML/CFT supervisors. TCA notes that supervision by the Securities Commission of trustees involved in monitoring financial institutions is consistent with TCA's submissions to MED in relation to the RFPP.

TCA notes, however, that it has concerns in relation to some aspects of the RFPP proposals in relation to fit and proper assessments. In particular, in TCA's opinion the role of trustees in relation to initial and ongoing merit assessments should be limited to providing specified information or assessments of a type ordinarily collected or made by the trustee for its own purposes to the regulator to assist the regulator in undertaking merit assessments. TCA's concerns have been set out in full in its submissions to MED in connection with the RFPP. TCA would be pleased to provide the FATF Inter Agency Working Group with more information on these concerns if required.

Two Stage Implementation

TCA supports a two stage implementation of the AML/CFT supervisory framework, provided that:

• implementation is aligned to implementation of any law reform that emerges from the RFPP; and
• financial institutions, including trustees, are given sufficient lead in time to make the necessary changes to systems and procedures associated with the framework.

AML/CFT Advisory Group

On the basis that the AML/CFT Advisory Group will provide strategic oversight of, and advise government in connection with, the AML/CFT regime, it is not appropriate that it contain non public sector representation. However, TCA considers that it should be an express duty of the AML/CFT Advisory Group that it consults widely with representatives of the financial institutions affected by the AML/CFT regime, including the trustee sector.

Appendix 1

The Trustee Corporations Association of New Zealand (TCA)

TCA is a long-established association to which all statutory trustee corporations belong. The members of TCA are Public Trust and each of the other trustee corporations authorised under the Trustee Companies Act 1967 to administer the estates of deceased persons and other trust estates - being The New Zealand Guardian Trust Company Limited, Perpetual Trust, New Zealand Permanent Trustees Limited (wholly owned by Public Trust) and Trustees Executors Limited. Covenant Trustee Company is an associate member of TCA and is authorised by the Securities Commission under Section 48(3) of the Securities Act 1978.

TCA sets minimum standards as practice guidelines for the performance of personal client services and corporate trust managers - standards for integrity, competence, financial capacity, internal controls, powers and duties, standards for conflict of interest and for reports from scheme operators.

TCA members act as trustees for financial products offered to the public. These include debt securities, debenture stock, unsecured notes, convertible notes, unit trusts, participatory securities, retirement villages, syndicated investments, credit union and building society products, externally managed group investment funds, and superannuation products.

TCA members provide investor and beneficiary protection in a number of ways and at various levels. They provide independent prudential supervision of financial arrangements. In certain instances fund managers must appoint a corporate trustee to meet regulatory requirements before they can launch a financial product. Where a corporate trustee has been appointed in relation to a financial product, the investors can take comfort in the fact that a competent and professional organisation is there to watch and protect their position.

TCA maintains relationships with government ministries and departments, regulatory bodies and financial sector groups.

Contact: Bob Moffat
Executive Director
Trustee Corporations Association of New Zealand
PO Box 2382
WELLINGTON