The Dirty Money Series #13: Non-compliance and penalties

Posted by Dacreed on Jul 29, 2019 11:45:00 AM

Blog #13Cooperation between businesses, supervisors and government agencies is integral to the success of the AML/CFT (anti-money laundering and countering financing of terrorism) regime. Businesses are key players in the prevention of money laundering and terrorism financing. Law enforcement is the last line of defence. For example, if as a business owner you can’t conduct customer due diligence (CDD) adequately, you must not establish or continue a business relationship with a customer. Further, businesses are relied on by the NZ Police’s Financial Intelligence Unit (FIU) to detect and report suspicious activity. The long-term success of this synergistic relationship between businesses and government agencies depends on businesses embracing their legal duties.

Supervisors expect businesses covered by the regime to meet their legal obligations and generally believe most individuals and businesses are willing to comply. They have a range of responses to deal with non-compliance; the response depends on the seriousness of the non-compliance and the attitude of the business. Responses vary from a mediation plan where the business is asked to comply within a certain time frame to formal warnings which may be made public in some cases.


First case under NZ’s AML/CFT regime

In 2017 a foreign exchange dealer in Auckland was prosecuted for flagrant breaches of many aspects of the AML/CFT Act, including failure to carry out CDD, and fined $5.3 million. To put this penalty in context, according to a Department of Internal Affairs spokesperson, the defendant had had 2 ½ years of contact with the regulator before this outcome and chose willfully not to engage.


AML/CFT regime has teeth

For serious or deliberate non-compliance a firmer stance is taken. For breaches of civil offences, individuals can be fined up to $200,000 and companies can be fined up to $2 million. Repeated failure to comply with AML/CFT obligations, providing false or misleading information and other criminal offences can result in fines up to $5 million for businesses, while individuals can be fined up to $300,000 or sentenced to up to 2 years in prison.


First defended case under the AML/CFT Act

In 2018 a financial services business with a sole director and shareholder, who was also its compliance officer, was fined $356,000. In awarding the lower penalty, the court took into account various mitigating factors including incorrect advice, difficulty of compliance, and the poor English language skills of the business’s owner and compliance officer.



Topics: Insider, Business Management, AML/CFT

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