Mutual Evaluation of New Zealand
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Anti-money laundering and counter-terrorist financing measures financing counter-terrorist and laundering Anti-money Anti-money laundering and counter-terrorist financing measures New Zealand Mutual Evaluation Report Zealand New April 2021 2021 The Financial Action Task Force (FATF) is an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. The FATF Recommendations are recognised as the global anti-money laundering (AML) and counter-terrorist financing (CTF) standard. For more information about the FATF, please visit the website: www.fatf-gafi.org. This document and/or any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. This assessment was adopted by the FATF at its February 2021 Plenary meeting. Citing reference: FATF (2021), Anti-money laundering and counter-terrorist financing measures – New Zealand, Fourth Round Mutual Evaluation Report, FATF, Paris http://www.fatf-gafi.org/publications/mutualevaluations/documents/mer-new-zealand- 2021.html ©2021 FATF/OECD and APG-. All rights reserved. No reproduction or translation of this publication may be made without prior written permission. Applications for such permission, for all or part of this publication, should be made to the FATF Secretariat, 2 rue André Pascal 75775 Paris Cedex 16, France (fax: +33 1 44 30 61 37 or e-mail: [email protected]). Photo Credit - Cover: © Miles Holden Table of Contents Executive Summary 3 Key Findings 3 Risks and General Situation 5 Overall Level of Compliance and Effectiveness 6 Priority Actions 11 Effectiveness & Technical Compliance Ratings 12 MUTUAL EVALUATION REPORT 13 Preface 13 Chapter 1. ML/TF RISKS AND CONTEXT 15 ML/TF Risks and Scoping of Higher Risk Issues 16 Materiality 19 Structural Elements 20 Background and Other Contextual Factors 20 Chapter 2. NATIONAL AML/CFT POLICIES AND CO-ORDINATION 31 Key Findings and Recommended Actions 31 Immediate Outcome 1 (Risk, Policy and Co-ordination) 33 Chapter 3. LEGAL SYSTEM AND OPERATIONAL ISSUES 41 Key Findings and Recommended Actions 41 Immediate Outcome 6 (Financial Intelligence ML/TF) 45 Immediate Outcome 7 (ML investigation and prosecution) 57 Immediate Outcome 8 (Confiscation) 70 Chapter 4. TERRORIST FINANCING AND FINANCING OF PROLIFERATION 81 Key Findings and Recommended Actions 81 Immediate Outcome 9 (TF investigation and prosecution) 84 Immediate Outcome 10 (TF preventive measures and financial sanctions) 89 Immediate Outcome 11 (PF financial sanctions) 94 Chapter 5. PREVENTIVE MEASURES 99 Key Findings and Recommended Actions 99 Immediate Outcome 4 (Preventive Measures) 102 Chapter 6. SUPERVISION 117 Key Findings and Recommended Actions 117 Immediate Outcome 3 (Supervision) 119 Chapter 7. LEGAL PERSONS AND ARRANGEMENTS 135 Key Findings and Recommended Actions 135 Immediate Outcome 5 (Legal Persons and Arrangements) 137 Anti-money laundering and counter-terrorist financing measures in New Zealand – ©2021 | FATF, APG 2 Chapter 8. INTERNATIONAL CO-OPERATION 149 Key Findings and Recommended Actions 149 Immediate Outcome 2 (International Co-operation) 150 TECHNICAL COMPLIANCE ANNEX 163 Recommendation 1 – Assessing risks and applying a risk-based approach 163 Recommendation 2 – National Co-operation and Co-ordination 166 Recommendation 3 – Money laundering offence 167 Recommendation 4 – Confiscation and provisional measures 169 Recommendation 5 – Terrorist financing offence 172 Recommendation 6 – Targeted financial sanctions related to terrorism and terrorist financing 174 Recommendation 7 – Targeted financial sanctions related to proliferation 179 Recommendation 8 – Non-profit organisations 181 Recommendation 9 – Financial institution secrecy laws 184 Recommendation 10 – Customer due diligence 185 Recommendation 11 – Record-keeping 190 Recommendation 12 – Politically exposed persons 191 Recommendation 13 – Correspondent banking 192 Recommendation 14 – Money or value transfer services 193 Recommendation 15 – New technologies 194 Recommendation 16 – Wire transfers 198 Recommendation 17 – Reliance on third parties 201 Recommendation 18 – Internal controls and foreign branches and subsidiaries 202 Recommendation 19 – Higher-risk countries 203 Recommendation 20 – Reporting of suspicious transaction 204 Recommendation 21 – Tipping-off and confidentiality 205 Recommendation 22 – DNFBPs: Customer due diligence 205 Recommendation 23 – DNFBPs: Other measures 207 Recommendation 24 – Transparency and beneficial ownership of legal persons 208 Recommendation 25 – Transparency and beneficial ownership of legal arrangements 215 Recommendation 26 – Regulation and supervision of financial institutions 219 Recommendation 27 – Powers of supervisors 222 Recommendation 28 – Regulation and supervision of DNFBPs 223 Recommendation 29 – Financial intelligence units 226 Recommendation 30 – Responsibilities of law enforcement and investigative authorities 229 Recommendation 31 – Powers of law enforcement and investigative authorities 230 Recommendation 32 – Cash Couriers 232 Recommendation 33 – Statistics 235 Recommendation 34 – Guidance and feedback 236 Recommendation 35 – Sanctions 237 Recommendation 36 – International instruments 238 Recommendation 37 – Mutual legal assistance 239 Recommendation 38 – Mutual legal assistance: freezing and confiscation 241 Recommendation 39 – Extradition 242 Recommendation 40 – Other forms of international co-operation 243 Summary of Technical Compliance – Key Deficiencies 249 Glossary of Acronyms 255 Anti-money laundering and counter-terrorist financing measures in New Zealand – ©2021 | FATF, APG Executive Summary Executive Summary 1. This report summarises the AML/CFT measures in place in New Zealand as at the date of the on-site visit from 26 February to 15 March 2020. It analyses the level of compliance with the FATF 40 Recommendations and the level of effectiveness of New Zealand’s AML/CFT system, and provides recommendations on how the system could be strengthened. Key Findings a) New Zealand has a robust understanding of its money laundering and terrorist financing (ML/TF) risks. It has established a comprehensive multi-tiered risk assessment process, with its national risk assessment (NRA) undergoing two full cycles. National AML/CFT policies and activities address identified ML/TF risks to a substantial extent. Authorities have taken action to respond to emerging TF risks in the context of a lower overall risk profile. Domestic co-ordination and co-operation are strengths of New Zealand’s AML/CFT system. b) New Zealand’s law enforcement agencies (LEAs) regularly use financial intelligence. The New Zealand Police Financial Intelligence Unit (FIU) produces and disseminates a wide range of financial intelligence products, which generally support the operational needs of competent authorities. However, New Zealand authorities could benefit from better exploiting the potential of financial intelligence to detect criminal activity by persons not already known to law enforcement. c) New Zealand identifies and pursues parallel money laundering investigations alongside investigations of significant proceeds- generating. Its authorities are adequately skilled and trained to conduct financial investigations with a wide range of investigative tools are available to them. Financial investigations are increasingly being used to support prosecution on money laundering charges and the number of prosecutions into ML have increased since 2018. Anti-money laundering and counter-terrorist financing measures in New Zealand – ©2021 | FATF, APG 44 | 4EXECUTIVE SUMMARY d) New Zealand Police has a strong focus on confiscation of proceeds of crime, backed by a top-level target for the volume of criminal assets to be restrained (NZD 500 million by 2021). The skilled Asset Recovery Unit (ARU) works in co-operation with investigative authorities to initiate parallel restraint and forfeiture proceedings in response to identified crime and financial intelligence. New Zealand has pursued international asset recovery cases that involve significant volumes of inbound and outbound proceeds. e) There is sound co-operation and co-ordination between New Zealand Police’s National Security Group (NSG), Financial Crime Group (FCG) (including the NZPFIU) and other relevant agencies on monitoring possible Terrorist Financing. Following the 2019 Christchurch attacks, New Zealand demonstrated its capacity and effectiveness in undertaking and supporting terrorism financing investigations. New Zealand has not prosecuted any terrorism financing cases, which is consistent with its generally low TF risk profile. f) There is a strong legislative framework for the implementation of targeted financial sanctions (TFS) without delay. However, reporting entities have a variable understanding of TFS, due to limited guidance and outreach by relevant authorities, as well as the lack of a mandate for supervisors to undertake supervision of TFS implementation. No assets have been frozen in New Zealand pursuant to TFS regimes. While this may be consistent with New Zealand’s risk profile, it could also reflect the limited TFS guidance, and the lack of outreach and supervision on TFS. New Zealand authorities have prosecuted a contravention of export restrictions under UNSC DPRK sanctions. g) New Zealand