Money laundering is happening every day all over the world. And New Zealand is not immune. In fact it would surprise most New Zealanders to learn that money laundering is big here, very big. More than $1.35 billion in proceeds from drug dealing and fraud is laundered every year through legitimate NZ businesses. This is just the ballpark figure for 2018.
The actual transactional value of money laundering is likely to be several times that amount, as launderers move funds through multiple transactions. And the reality is that the true cost to the country, which includes the social cost of the organised crime and the suffering it causes, is estimated to be a great deal higher.
Globally NZ is well thought of and has an excellent international reputation. The downside of NZ’s reputation for low corruption and high integrity is that it can be exploited by criminals. For instance, if criminals want to move money from a high-risk jurisdiction like the Seychelles they may attempt to route it via services provided in a low-risk country like NZ.
A report by the NZ Police’s Financial Intelligence Unit (FIU) highlights the social, economic and reputational damage associated with money laundering and financing of terrorism. Drug dealing, fraud, theft, corruption, tax offending, human trafficking, cybercrime and environmental crimes, all of which have money as their driving force, cause direct financial losses to individuals and harm to communities. High-profile money laundering cases cause reputational damage to NZ’s brand.
The FIU report says the channels that offer opportunities to money launderers in NZ are cash intensive, offer anonymity to offenders, are available for moving large values and volumes of legitimate funds, and are operating internationally.
Recent changes to the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act 2009 have put in place practical measures to protect businesses and make it harder for criminals to profit from, and fund, illegal activity. These developments also help New Zealand to maintain its reputation as being one of the least corrupt countries in the world and a good place to do business.
Over the next few weeks, Dacreed is going to post a series of articles about the AML/CFT regime and what you have to do to meet its requirements.
Next in The Dirty Money Series: How dirty money is cleaned
Shorty, a new gang prospect, pays cash from drug sales to a gang-owned company (Going Gangbusters) for the purchase of a non-existent product. Going Gangbusters loans the money to another company who employs Shorty’s boss as a security consultant. Shorty’s boss then collects an income for doing nothing. Which is the best way for the money laundering to be identified?
- Initial customer due diligence
- Monitoring transactions
- Ongoing due diligence
Hint: “Layering” is the process where money is moved through multiple accounts and transactions to hide where it originally came from.