New laws to counter money laundering and terrorist financing

The OECD's Financial Action Task Force has advised the Government that changes are needed in our laws to bring New Zealand up to speed with international standards. In response to these recommendations, the Government has drafted the Terrorism Suppression Amendment Bill (No.2), which introduces a number of important changes to New Zealand's largely deregulated financial system.

Justice Minister Phil Goff has conceded that there is no specific evidence pointing to the conclusion that New Zealand is currently being exploited by international crime and terrorist networks to launder money or finance terrorism.

Nevertheless, several potential loopholes have been identified that can be addressed in order to comply with strict international requirements. According to the Minister, the administrative costs associated with introducing the new law are outweighed by the risk of damage to New Zealand's financial and political reputation that could result if no action is taken.

Cabinet has suggested that the following changes be implemented by legislation:

• a comprehensive monitoring framework to ensure that all financial institutions meet standards for countering money laundering and terrorist financing;



• a registration regime for persons providing money transfer or currency change services;



• statutory requirements for financial institutions to comply with customer due diligence and to implement anti-money laundering systems and procedures;



• a requirement that financial institutions obtain, verify and retain information concerning the identity of the originator of wire transfers;



• a possible requirement that directors and senior managers of financial institutions in the insurance and securities sectors are evaluated to ensure that they meet the fit and proper persons' criteria;

An interagency working group, chaired by the Minister, is currently consulting with the financial sector on the function and funding of the anti-money laundering framework and registration regime. A Select Committee report is due on 31 May 2005.

Enquiries and information

For more information on any of the cases, articles and features in Financial Services Quarterly, please email Rachel Gowing or call on 64 9 916 8825.