New Zealand's anti-money laundering (AML) regime could be simplified and improved, although care would need to be taken to avoid jeopardising our good standing in the international community, not to stop information flow to the police, and to avoid creating loopholes criminals can exploit, says leading AML lawyer Gary Hughes.
Hughes speaks about the Anti-Money Laundering and Countering Financing of Terrorism Act, which has just notched up 10 years since taking effect, in a new episode of interest.co.nz's Of Interest podcast.
The Act's impact is widely felt. This isn't surprising given the police describe businesses operating in the financial, legal, property and high value goods markets as being at the frontline for countering illicit activity, while describing themselves as the last line of defence against money laundering and terrorism financing. As an election approaches, both the National and ACT parties are making noises about lessening the AML/CFT burden on businesses, which the Ministry of Justice estimates costs NZ about $260 million a year.
Hughes, an Auckland-based barrister who chairs the AML and Sanctions Experts Committee at the International Bar Association, sees "a good deal of scope for simplifying and improving the regime," thus potentially making compliance for businesses easier. He gives the example of a code of practice around identity verification for small businesses, noting there can be too much tick box regulation and a one size fits all approach.
But he says care needs to be taken.
"You don't want to lose the benefits of good standing in the international community. We're now seen by the FATF [Financial Action Taskforce] and others as doing very well in this regard. And also you don't want to lose the information flow to the police or create loopholes that criminals are rich enough or cunning enough to exploit. So it's always a balancing act," Hughes says.
In the podcast Hughes also talks about how to measure the extent to which the Act is preventing money laundering and terrorism financing, what the impetus behind the Act was, why FATF is described as "the most powerful international body you've never heard of," how the Act is instrumental in collecting key data and evidence for police, why he thinks NZ should have one AML/CFT Act supervisor instead of three, what happens to the thousands of suspicious activity and transaction reports, whether the regime is outcomes focused enough, financial exclusion and more.
"People say it's too costly and it's a handbrake on business. And yes it is partly. But equally some of those businesses, if you look at the banking sector, are making enormous profits and have very good information that I would think why shouldn't they be forced to actually use some of that and pass on the intelligence to support the law enforcement efforts? I don't think you can take all the cream out of the economy and not offer something back," says Hughes.
*You can find all episodes of the Of Interest podcast here.
