NZ’s Ambiguity In Law Is A Weakness To Combatting Financial Crime, Trans-national Crime And Financing Of Terrorism

New Zealand’s Ministry of Justice, is the Administrator of NZ’s Anti-Money Laundering and Countering Financing of Terrorism Act. The AML/CFT Act is soon to have an update to address existing weaknesses. Politicians must react “swiftly” and update NZ’s AML/CFT compliance laws to bridge the existing gap of not capturing “traditional Hawala” and/or “Underground Banking”.

The ease of facilitating financial activity and harvesting “financial crime” has become too easy for trans-national criminals. This is why, for all countries, Financial Inclusion is far safer than Financial Exclusion.

International Standards of AML/CFT have not yet properly addressed the rising risk of banks applying a blanket ban to “all risks”. Risk evaluation is about informed decision making, not a tick-box exercise. All banks have failed in this regard if they apply a “tick box” blanket ban.

Banking is an essential service. Denying a private individual or a business an essential service needs to be made on an “informed basis”. This requires calculation and decision making that is commercially fair to all persons and not breaching discrimination laws.

Financial exclusion is a risk that New Zealand’s Ministry of Justice and AML/CFT Supervisors have not yet fully addressed. The adverse consequence of financial exclusion is “Underground Banking”.

By registered banks taking a position of “blanket” bans against money remittance services, weaken the ability to detect serious financial crime. A blanket ban also penalises persons who are denied an essential service when they have no connection to facilitating financial crime.

Those countries that do not clearly define traditional “Hawala” and “Informal Transfer” and/or “Offsetting” – are at greater risk of harm arising from financial exclusion. This includes New Zealand.

New Zealand’s current progressing of the AML/CFT Amendment Bill will hopefully, finally, see the existing and continuing weaknesses finally closed.

Closing these existing gaps must include defining “informal value transfers” or “Hawala” type activity. Australia has updated their laws – so have other countries. New Zealand must follow.

If the Ministry of Justice and the Select Committee fail to address this gap, New Zealand will remain a country with weakened ability to detect, report and monitor activity linked to serious financial crime, money laundering, trans-national crime and financing of terrorism.

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