Reserve Bank issues 'dirty money' warning

Casinos, banks and financial institutions are being required to identify money laundering threats under new law coming into force on June 30. Photo / NZ Herald

New Zealand cannot afford to become a weak link in the chain of global efforts to crack down on money laundering and terrorism financing, says the Reserve Bank.

The Anti-Money Laundering and Countering Financing of Terrorism Act, which is designed to stem the flow of 'dirty money' through the country, comes into effect at the end of this month after more than two years in the pipeline.

One of the main objectives of new regime was to build New Zealand's reputation by adopting international Financial Action Task Force (FATF) standards, said Reserve Bank anti-money laundering manager Rob Edwards.

In a speech given in Wellington today, Edwards said it was vital that the country complied with those standards to help maintain the prospects of Kiwi businesses on the world stage.

"Global businesses are becoming more aware of the international reputations of the jurisdictions they do business with and in.

"An unfavourable assessment from FATF would mean that New Zealand businesses would face costs, delays and other barriers when doing business with overseas trading partners and global businesses."

Edwards added that a weak anti-money laundering regime also increased the likelihood of organised criminal groups and financiers of terrorism exploiting New Zealand's financial system.

Earnings from crime in New Zealand could be as high as $6 billion a year, he said.

"Even if only one tenth of those proceeds of crime is laundered, you can see that the potential scale of the problem is huge.

"New Zealand has comparatively low rates of crime and corruption, but we are not immune."

Under the new law, financial institutions and casinos will have to identify where they are at risk of being used to launder money or fund terrorist activities. They must also have a plan in place to mitigate those risks and train staff to overcome them.

Any suspicious financial transactions will be reported to the police.

The Reserve Bank, Department of Internal Affairs and Financial Markets Authority have each been given responsibility for supervising and enforcing the law.

Edwards stressed that the problem of terrorism financing should not be underestimated.

"Although New Zealand seems far away from international terrorism, we are not immune from being involved in activities related to the financing of terrorism.

"Financing terrorism is a global activity and a serious global problem."

The three supervising entities were ready to begin their new role and would be checking firms had systems in place to comply with their AML obligations.

"We expect that our monitoring activity will alert us to any breaches that will be investigated and potentially result in enforcement actions," Edwards said.

"Supervision is a two-way street; willing and enthusiastic participation by industry will make the process more efficient and make the regime more effective."

A separate piece of legislation has been signed off this week by Justice Minister Judith Collins, closing a legal loophole which allowed wealthy criminals to escape money-laundering charges if they spent their gains publicly.