Government launches campaign to keep public in the loop as lawyers, accountants and real estate agents need to start complying with anti-money laundering rules

The Government is trying to take the public with it as it rolls out the second phase of the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Act.

It is launching a public information campaign, ‘Keep Our Money Clean’, as accountants, lawyers, real estate agents, high value dealers and the New Zealand Racing Board join banks, casinos, a range of financial service providers, and some trust and company service providers in needing to comply with the Act.

The campaign website explains:

“Any business that provides these services will need to put systems and processes in place to prevent criminals from trying to exploit them, and ensure they can identify their customers, know their addresses and, in some cases, know the sources of their customers’ funds.

“Additionally, all businesses and service providers covered under the AML/CFT Act (including those from the first phase) will now have reporting requirements that relate to particular transactions as well as suspicious activities.

“Generally speaking, customers and users of these services don’t need to do anything. Simply be aware that some extra information may be required from you during these transactions.

“Even if you have been a customer of these businesses for a long time, they may need to ask you to help confirm that you are who you say you are and, in some cases, tell them where the money you are going to use has come from.

“The information you are asked to provide will vary depending on whether you are doing business as an individual or part of a partnership, company, public body, estate or trust.

“Businesses are not doing this because they think you are laundering money – they are doing it to help protect everyone and because they are required to under the law.”

The Government estimates over $1 billion a year coming from drug dealing and fraud can be laundered through New Zealand businesses. 

Justice Minister Andrew Little says the 'Keep Our Money Clean' campaign starts today and will run in four stages as new business sectors come under the AML/CFT Act.

The Act affected lawyers from July 1, and will affect accountants from October 1, real estate agents from January 1 2019, and high value goods dealers and the New Zealand Racing Board from August 1 2019.

“Money launderers undermine our country’s financial and justice systems, and leave us vulnerable to trans-national crime,” Little says.

“If the world loses confidence in us, our ability to protect our financial channels, our hard-won international financial and trade reputation will be at risk.

“The Government has prepared ‘Keep our Money Clean’ information packs for law practices, accounting business agents and real estate agents so that customers can understand the anti-money laundering requirements those businesses are required to uphold.”

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27 Comments

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How very dare they! Casting aspersions on the paragons of virtue in the real estate industry, we all know that the entire growth in house prices is completely legit. Driven by demographic oscillations and NZ's powerhouse rock star economy.

How true

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17

Closing the door of the stable after John Key has bolted on his white horse!

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11

Yeah and got a knighthood for rebranding little NZ (Trying to change our flag) to make better land/property sell off sales to overseas buyers. What is the wold coming too?!

Nope, Ron Pol was quoted on National Radio over the weekend, that the measures will have negligible impact. Ron comments and contributes here reasonably regularly, and his commentary has always made sense and seemed to be well researched. So i tend to believe him over a politician any day. This looks like a case of politicians wanting to be seen to be doing something without actually understanding what is really needed or the consequences of what they are actually doing. The blind leading the blind, or egos running rampant!

Thanks Murray. I posted a link to the RadioNZ Insight program (28 mins) at link below, leading with a comment by the journalist that it would be "more than enough to feed every malnourished person in the world, and provide clean drinking water", if countries were as effective in recovering proceeds of crime as drugs, but rarely even 1% is recovered [audio at 1.15]
https://www.linkedin.com/feed/update/urn:li:activity:6426540220879073280

and this morning (at 5.20am, 3 mins or so, link below), with my comment:

New Zealand's new AML awareness campaign (a mishmash of platitudes and misperceptions, with a few good bits) lacks clear objectives. If it's about crime prevention, policymakers should ask officials to produce evidence that unreflective adherence to the "education about compliance with rules based on standards" mantra, demonstrably ineffective, will magically have the big impact on crime claimed, when it hasn't anywhere. Ignoring decades of science, and the United Nations and Europol. Even Dynamo would have trouble pulling that non-existent rabbit out of a hat.
https://www.linkedin.com/feed/update/urn:li:activity:6427605314417364992

To which the Justice Minister responded (albeit to just a single Q). (Audio: https://bit.ly/2NHAA7v). And my comment:
Ironically, after suggesting an innovative prospect for evidence-informed cannabis law reform, & advocating "effective" family violence solutions (3:10 in the audio), Minister describes AML education campaign (from 3:22) as identification checks to track cash transactions. Disregarding decades of science & evidence. Cash from retail drug sales is a fraction of crime funds through electronic transactions. Evidence also reveals many examples of criminals using their own names & verifiable fronts. So, lawyers will tick boxes 'proving' compliance, and criminals will successfully launder, 'proving' wealth as property developers. With citizens mostly disrupted. So the campaign's unintended effect may be to quell public discontent. Crafted in a critical thinking & imagination free zone, rules and a campaign driven by unfounded assumptions disconnected from science & evidence disregard a key issue in public policy - whether policies will be effective. Does the Minister really intend to extend AML's exemption from the critical eye of evidence-informed policy effectiveness he seeks to apply elsewhere?

Little displays his poor grasp of the issues by asserting the shiny new AML processes will detect and deter large scale laundering. The very complex linked structures and trusts employed by sophisticated international launderers are beyond the capacity of real estate agents, most bankers and accountants, certainly suburban Denis Denutos and even many big end of town lawyers, to penetrate sufficiently in order to be compliant.

All persons with a beneficial interest in a trust and all trusts linked or related to it must be accurately identified and that information regularly updated. The logistics of properly doing so, very difficult as they can be, pale to insignificance compared with the deeply detailed trust and corporate legal knowledge required to properly identify those beneficial interests in the first place. And to keep that knowledge up to date in the face of changes designed to frustrate monitoring.

The headhunters drug money might not make it through the AML/CFT drafting gate but the Pablo Escobars of this world probably don't have too much to fear.

In fairness, most money launderers are probably small fry compared to the Pablo Escobars (or even Bill Liu / William Yan) of this world. They'll use the easiest places first, rather than somewhere with a bit too much hassle and a bit too stalled a property market.

Many of the locals will be mostly doing it locally. And the Minister on Sunday seemed to say it was $10b. And he may be right.(The $1b headline figure in the 'education' campaign is decidedly odd, although the small print says its more).

And the empirical evidence in the real estate market, where lawyers and agents have had AML obligations since 1996, shows exactly how its done. Although the new regs are more extensive in many ways, real estate's been a constant since 1996. It now has a few more difficulties for crims but, being based on assumptions, the new regs have added in a bunch of gaps that weren't all there previously. And I saw lots of evidence of displacement, so the gaps between the assumptions and the ways that crims actually use lawyers and agents to launder are sufficiently wide anyway. And the levels of unwitting and wilfully blind need to drop an awful long way for effectiveness to creep into a tick-box compliance regime anytime soon.

My research didn't track for property boom/bust, but when crims earn their dosh they'll still need to buy property and other stuff, property market stalled or not.

I wonder if it's really about laundry at all. It seems very convenient for governments to shut down bank accounts and cash flows of political powers they don't like. Before 2013 we would never have guessed the NSA is permanently storing everything you do on the internet. We're doing it to protect people is the excuse every time.

A few researchers have tried to grapple with that. Circumstantially it makes sense. The contemporary ML system is almost completely ineffective, with hardly the impact of a rounding error on criminal accounts (and by, albeit imperfect, implication, crime) [http://doi.org/10.1108/JFC-08-2017-0071] yet curiously there's very little real momentum towards making it effective, even after 30 years [and NZ is following that in lockstep, tick box favoured over (crime prevention) policy effectiveness]

When Europe said recently its AML laws couldn't shut down Iranian transactions just because US sanctions came back on, one of the clearest indications of what you say surfaced, when the Americans told them to do it anyway. So, the hypothesis is valid that AML is an adjunct foreign policy tool, but proving it robustly is difficult.

But....it's about the vibe....

Tell Little he's dreamin'

Agree that the Minister appears not yet on top of this one. His messaging displays fundamental misconceptions. That said, so does the legislation and most of the education campaign, so trying to come to grips with something that makes little sense to begin with is a tad difficult.

For anyone who cares about policy effectiveness (as he actually seems to, funny enough, in other areas), Little was handed an absolute pig of a thing. And it might be a fair guess that if its the same team advising him now, internally and externally, that advised the last government, they might well have felt the need to invest heavily in lipstick and perfume now that the pig has a new owner. Now if he'll only sip a bit more of the Kool Aid, all will be well.

But, the buck stops with him, so, in the same way that the last Govt appears to have chosen its course, after I rather rudely presented the primary options as (a) get the FATF tick, or (b) apply policy effectiveness principles and have a significant, demonstrable impact on serious crime, the new Govt has that same choice.

I never expected any pollie to actually say it was (a). They'd always claim (b) as well. As the last Govt did. And it would be hard to find a smoking gun email or 'open mike' slip of the tongue.

But surprisingly the new Minister straight up admitted in the RNZ piece (at 10:38 audio) that "what we're doing is because we signed up to international agreement saying that we would do this". Refreshingly honest at least.

Personally, I reckon option (b) would be better, but I'm not the Minister. So, at this rate, irony looks like settling down if Little really is in effect, doubling down and extending Keys brilliant obfuscation on NZ foreign trusts in April 2016. Barn doors, ajar, 15 months of noise. Equine movement. An inadvertent double act, now for the benefit of local crims and all those others using NZ.

I admire your faith in the AML regime but not holding my breath.

‘2–5 per cent of total global GDP (NZ$800 billion – NZ$2 trillion) is being money-laundered yearly, and of that the Ministry of Justice conservatively estimated $1.5 billion NZ made its way to New Zealand. He also quoted other research indicating the real figure as being closer to $10 billion NZ’

http://insight.thomsonreuters.co.nz/amlcft-guide-for-lawyers/

Fair enough.

I do believe I've had lunch at a few money laundries too.

Yep, middleman, but don't you go trusting anyone spouting that 2-5% figure, it's long been proved hokum.

And the primary NZ estimate is the police one, 1.35b, which translates to $1.76 crim proceeds (using police own figures retrofitted). But that's just domestic generated (mainly drugs & fraud).

Add in tax evasion. One IRD figure says $1.23b, another IRD/SFO says $3.77b. Unclear the extent to which some of that is added to the other. Either ways, it's an annual figure.

Then add transnational. How longs this string? No-one knows, but the Minister's $10b might not be far off. Three parts. (i) Crim funds o/seas coming into NZ (Sinaloa cartel drive by purchase of 50 AKL houses). (ii) Crim funds passing through NZ (Albanian sex traffickers via Swiss lawyer deposits into NZ lawyer trust account for ppty development. Deal falls over. How sad. Law firm sends money onward. Ta muchly. Money coming from reputable firm from reputable country is the perfect fit. No decent launderer would use a dodgy country) (iii) Crim funds never in NZ, use NZ vehicle to hold crim assets o/seas. (NZ foreign trusts, pre-big Equine shoo. What little we do know about here indicates the figures could have been very, very large indeed. Possibly trillions, more likely 'only' hundreds of billions. No-one knows. But say it was just $10b. If we'd decided (legally) to coax a bit more info about them, passed it to FBI, they seize the $10b in Manhattan real estate owned by Sinaloa cartel through NZ foreign trusts, the Americans often share. A 30% cut would have been $3b to NZ. Handy for any Finance Minister, red or blue. And a real blow to crime. And maybe even enough to delay a couple of meth shipments to NZ as they regroup. Less harm too. That is of course only a hypothetical counterfactual, opportunity lost. Interesting, if sad, to see history repeating, as Little seems (thus far at least) to be walking perfectly in stride with the Nats bootsteps. Ain't politics a funny thing.

Ha !. We were regular diners at one, brilliant food, great management and staff, felt like a legitimate business. We were stunned to learn when it suddenly closed that it had been a laundering operation.

What? You were financially supporting a money laundering operation?

;)

DC. not knowingly as we put the restaurant through the AML/CFT process but it all got a bit hard because there were so many trusts with numerous people who had a beneficial interest, whose names we couldn't pronounce and who lived in faraway places. So we just went through the motions and hoped like hell we wouldn't end up in trouble with the authorities.

Been there, done that too, middleman. I took photos. Used it in training for police, customs, revenue here and overseas. Its one of my three easy examples to launder and never be caught unless you do something really dumb.

Money laundering is a catch all for the authorities for when they can't nail you for anything else.

I work in finance. For all the millions spent on aml, the rules are incredibly simple to get around. If the police, and regulators actually did their jobs it would be unnecessary. For one, police reluctance to get involved in civil matters should be shelved.

Yup, my empirical evidence in NZ shows exactly that, in an area where lawyers and agents have already had AML obligations since 1996, real estate.

Funny as a lark, the new regs have added in a whole bunch of gaps that weren't there previously.

Academics have also known for decades, and the world knew since 2011 when the UN announced that despite the billions globally spent on AML each year up to 99.8% does indeed get around the rules.

Yet, the last government ignored evidence, science and the bleeding obvious, and this one thus far seems content to follow along without applying a skerrick of critical thinking.

A single question to the serried ranks of courtiers would reveal just how resplendent the cloak really is that officials and advisers have been so eloquently describing for decades.

I will say this the pictures are nice, not in anyway linked to the subject and more likely to confuse matters, but I would be interested in knowing the camera and locations. Better to be informative when the goal is being informative, not abstract and artsy. People will look at the human trafficking statement and may think only of people in containers, not their subcontracted tradie, their waiter serving them dinner and their mistress at the gentlemen's club. The same goes for the other ones, completely useless at identification, information to help prevention and what is the criminal punishment, impact on NZ, and how to report. They might as well be advertising for an Enya or yoga video making the overall message a back note of positivity about a horribly negative subject. Talk about poorly thought out design... they don't even have these translated into other languages people can read when looking at NZ for "investment".