Cooperation 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.
You must review your AML/CFT (anti-money laundering and countering financing of terrorism) programme to:
- ensure it stays up to date
- identify any deficiencies in its effectiveness
You must make any necessary changes as a result of your review. Ideally your review should be annual.
AML/CFT (anti-money laundering and countering financing of terrorism) is an area that is constantly evolving and ongoing training and professional development is a necessity for your staff to keep abreast of developments. Your AML/CFT programme needs to be a living programme that is implemented on a daily basis and is responsive to change. Therefore you need to proactively educate your team on why AML/CFT is important and what the obligations of each person are.
Reporting entities make a big difference in disrupting money laundering and terrorism financing in New Zealand and around the world. Appointed supervisors share a commitment to helping businesses meet their compliance obligations and keeping NZ’s money clean.
Reporting entities have to report suspicious activity as well as suspicious transactions to the New Zealand Financial Intelligence Unit (FIU). Typically, every year the FIU will receive between 7,000 and 10,000 reports of suspicious activity. Reports received by the FIU are analysed for activities and patterns that may indicate criminal offending and merit further investigation. The FIU’s 2018 risk assessment report says that between April and December of 2017 six money laundering charges were lodged each month.
Ensure you’re prepared to collect adequate customer due diligence (CDD) information on your new and existing customers. Verifying client identity and reporting suspicious activity are the two cornerstones of the AML/CFT (anti-money laundering and countering financing of terrorism) regime.
CDD is the process through which you develop an understanding about your customers and the ML/TF risks they pose to your business. Verifying information about your customer’s identity, beneficial owners, and representatives is very important to help protect your business from ML/TF.
Once a reporting entity (a business covered by the AML/CFT regime) completes its risk assessment, it must then put in place an AML/CFT (Anti-money laundering and countering financing of terrorism) programme that manages and mitigates these risks. A compliance programme has a direct relationship with the business risk assessment and must be based on it. When evaluating your programme (and risk assessment), supervisors and auditors will want to explore both its adequacy and effectiveness.
The foundation of a business’ AML/CFT (anti-money laundering and countering financing of terrorism) regime is an adequate and effective risk assessment. Businesses covered by the AML/CFT regime (known as reporting entities) have to assess the risk of money laundering and financing of terrorism they may reasonably expect to face in the course of business. This is called a risk assessment and must be done before creating an AML/CFT compliance programme.
It involves identifying the inherent risks faced by your business. ‘Inherent’ risks are those that exist before the controls required by the AML/CFT regime are put into place in your business.
Businesses covered by the AML/CFT (anti-money laundering and countering financing of terrorism) regime are known as reporting entities. If you operate a business that is a reporting entity you need to appoint a compliance officer to administer and maintain your AML/CFT programme.
The AML/CFT compliance officer is a key role in any organisation and any appointment to that role needs to be carefully considered. It is not a matter of simply assigning an employee, or yourself, to this role to demonstrate compliance with the Anti-Money Laundering and Countering Financing of Terrorism Act.
The AML/CFT (anti-money laundering and countering financing of terrorism) regime helps businesses take precautions against people who would seek to misuse the business for criminal gain. It aids in protecting the professional reputation of businesses in both NZ and international markets. In order to achieve these goals, the regime requires businesses covered by the Anti-Money Laundering and Countering Financing of Terrorism Act to put systems and processes in place to prevent criminals from trying to exploit any perceived vulnerabilities in those businesses.
Legitimate businesses have a contributing role in preventing the misuse of financial and professional services. Businesses operating in the financial, legal, property and high-value goods markets are at the frontline for countering criminal activity in NZ. They are the gatekeepers.
When criminals make money from illegal activities such as fraud, drugs and tax evasion they need to ‘clean’ it in order to spend it in the legal economy. They need to convert the proceeds of crime so that they can realise and enjoy the financial benefits of their offending.
Money laundering is a process that cleans illegally obtained funds of their dirty criminal origins. The money is laundered so it looks like it comes from a legitimate source, enabling criminals to cover their tracks and avoid being detected. Successful money laundering allows criminals to enjoy profits and furthers the cycle of criminality by making funds available for reinvestment in crime.
Risk is on the rise for New Zealand businesses, according to a recent survey. It also showed that those risks are occurring faster than they were before, with 52% of respondents confirming this.
Dealing with risk is an inherent aspect of business management, and it’s important to control and limit that risk so that you can focus on more important things, like growing your business and focusing on success.