Keynote address to Opening Ceremony of the Asia/Pacific Group on Money Laundering Annual Meeting 2015Justice
Tēnā koutou, tēnā koutou, tēnā koutou.
Nau mai haere mai.
Good morning ladies and gentlemen and welcome.
I am pleased to be able to join you this morning at the 18th Annual Meeting of the Asia/Pacific Group on Money Laundering.
First, I want to acknowledge the APG Secretariat and the APG co-chairs for their leadership, dedication and stewardship over the important work of the organisation.
The Asia-Pacific region is as complex as it is diverse. It’s made up of both some of the world’s largest and smallest economies, and is rich in cultural diversity.
But we all share a common goal – to work together to reduce serious crime in the Asia-Pacific region by tackling money laundering and financing of terrorism and the proliferation of weapons of mass destruction.
Today I will outline some of the work New Zealand is doing to address these serious issues as well as some of the progress we’ve made.
The impacts of money laundering
Money laundering is an insidious crime and a significant facilitator of economic crime. Criminals and their networks abuse financial systems in order to legitimize the profits and proceeds of their criminal activities.
Money laundering undermines the integrity and stability of financial institutions and systems, discourages foreign investment, and distorts international capital flows.
It has negative consequences for a country’s financial stability and economic performance, draining resources from more productive economic activities. It may even have destabilizing spill over effects on the economies of other countries.
In an increasingly interconnected world, the negative effects of these activities are global.
While it is impossible to put a definitive estimate of the amount of money that is globally laundered every year, the International Monetary Fund and the United Nations Office on Drugs and Crime estimates range between $590 billion – $1.6 trillion a year. These figures, while estimates, are indicators of the potentially crippling effect money laundering can have on the global economy.
The case for a robust regime
As we continue to put rules and regulations in place, we’re working against the increasing use of modern technologies and communications.
The ever-growing digital world, while a boom in many ways, also means criminals are now using smarter, more complex ways to disguise the illegal origins of their activities and to evade detection.
Money launderers and terrorist financiers exploit both the complexity inherent in the global financial system as well as differences between national AML/CFT laws and systems.
They are especially attracted to jurisdictions with weak or ineffective controls where they can more easily move their funds without detection.
Moreover, problems in one country can quickly spread to other countries in the region or in other parts of the world.
An effective anti-money laundering and countering-financing of terrorism regime is paramount to detecting and tackling these serious crimes.
Ensuring New Zealand’s regime is robust
New Zealand has recently taken some big steps towards updating and improving our AML/CFT regime, and we’re starting to see the benefits.
In 2013 we introduced the AML/CFT Act which was a major overhaul of our regime.
Individual institutions and firms are now much more aware of their money laundering and terrorist financing risks and have implemented AML compliance regimes to mitigate and address those risks.
These changes have also led to New Zealand’s financial institutions, casinos and Trust and Company Service Providers playing a much bigger role in detecting suspicious financial activity and alerting authorities.
Under the changes, 1760 financial institutions are now required to conduct due diligence on their customers and regularly report suspicious activity to authorities.
This means more comprehensive and accurate information is being collected and reported than ever before.
As a result, the reporting of suspicious transactions to New Zealand Police’s Financial Intelligence Unit has increased significantly.
The numbers of these reports to the Financial Intelligence Unit has increased threefold in 2013/14 to over 12,000 reports - up from 3500 reports in 2012/13.
The quality of reporting has also increased as the number of transactions reported in suspicious transaction reports have increased.
In 2012/13, nearly 12,000 transactions worth $545 million were reported.
In 2013/14, this grew to over 86,500 transactions worth NZ$3.5 billion being reported.
Suspicious transaction reports are an invaluable tool for law enforcement agencies to “follow the money trail” in detecting serious crime and reduce the harmful effects of their offending.
As an example, in the period between December 2013 and May 2015, suspicious transaction reports contributed to four major Police operations in New Zealand that led to 30 people being arrested with over $220 million worth of drugs and assets being seized.
These examples are good indicators that New Zealand is now a much more difficult and costly environment through which to launder criminal proceeds.
We are committed to sending a clear message that crime is not profitable in New Zealand.
We are proud to have a strong reputation as one of the least corrupt countries in the world. However while we consistently rank at the top of Transparency International’s Corruption Perceptions Index we cannot afford to become complacent.
Organised Crime and Anti-corruption Bill
Some of you may be aware that we currently have the Organised Crime and Anti-corruption Legislation Bill before our Parliament.
This Bill addresses a serious issue faced by societies around the globe. Organised crime is a corrupting influence worldwide, undermining public safety, economic development, good governance and national security.
The Bill also makes two important amendments to the money laundering offence under the Crimes Act.
First, it removes the requirement that the proceeds of the money-laundering be generated from offending punishable by 5 years’ or more imprisonment. This means that any offence, regardless of penalty, is a predicate offence for money laundering.
The second change makes it easier to prosecute money launderers (especially self-launderers) by clarifying that the prosecution is not required to prove that a defendant had specific intent to conceal the proceeds of crime It is enough that the criminal intended the act that resulted in concealment. This removes what has been a substantial barrier to prosecution in New Zealand.
In addition, the Bill introduces new reporting requirements under the AML/CFT Act for two high risk classes of transactions that we know criminals use to launder money and finance terrorism.
Under the new requirements, financial institutions will need to report international wire transactions of over $1,000 and all physical cash transactions of $10,000 or more to the Financial Intelligence Unit within Police.
The amendment will improve our ability to detect and investigate money-laundering and align New Zealand with international best practice for combating money laundering. It also brings us into greater alignment with our closest partners in the region, which will make it easier to law enforcement to share information.
Phase two of AML reforms
While we’re seeing some good results with the work we’re doing, as always there’s more to be done.
The Ministry of Justice has begun preliminary policy work considering a second tranche of AML/CFT reform to extend coverage to additional Designated Non-Financial Professions and Businesses, including lawyers, accountants, conveyancing practitioners, real estate agents and businesses that deal in high-value goods.
These are currently covered under the Financial Transactions Reporting Act but a next stage would see them subject to the more robust AML obligations under the AML/CFT Act.
You can expect more of an update on this work as it progresses.
Countering the financing of terrorism
I would like to turn briefly to the financing of terrorism.
As we all know, terrorism is an increasingly global problem that requires concerted global action by a united international community. Terrorist financiers abuse the financial system by concealing the use of the funds for terrorist activity.
The increasingly dangerous situation with ISIL or Daesh is showing us that methods of financing terrorism are rapidly changing and becoming more brazen.
A particularly troubling aspect is Daesh’s new and emerging methods such as grass root funding strategies through social media, which are proving to be both highly effective and difficult to trace.
Daesh has been branded by the media as the world’s wealthiest terrorist organization, with an estimated annual turnover of $2 billion.
Given the grave consequences of terrorist activity, disrupting the financial flows in and out of Daesh-held territories and detecting fundraising efforts through social media networks and through charities is critically important.
As the current chair of the UN Security Council Committee, New Zealand is overseeing the work of the Committee as it continues to focus sanctions on Al-Qaeda and associates, including Daesh and the Al-Nusra Front.
Sanctions can help squeeze revenue options for the group by disrupting the sale of specific commodities as well as to target external financiers and crack down on illicit ransom payments made in breach of the Al-Qaeda sanctions regime.
We’ll be keeping a close eye on this situation as it develops.
Just as threats and techniques evolve, policy makers and law enforcement authorities must also continue to be agile to confront them.
Having a strong domestic regime in place is important. We have a key role to play to protect our communities from harm and our economies from the effects of ‘dirty money’ and distorting our financial markets.
But we can’t do it alone. We must address these challenges together.
The transnational reach of money laundering, terrorist financing, and the financing of proliferation crime transcends cultural, social, linguistic and geographical borders. It must be met with a concerted response - states working together as part of a strong international network.
This is why New Zealand participates in regional and international forums, such as the APG and the Financial Action Task Force to strengthen our bilateral and multilateral relationships.
For example, New Zealand’s Financial Intelligence Unit recently completed a cooperation agreement with their counterparts in China and another agreement with Nepal is nearing completion.
Our AML/CFT supervisors also take part in the International Supervisors Forum with our partners from Australia, Canada, United Kingdom and the United States. A key focus of the forum is enhancing international cooperation.
Another important benefit of cooperation, of course, is that we can all learn from and support each other.
As APG members, we share a commitment in working together to stamp out money laundering in the Asia-Pacific region.
I am confident that the spirit of cooperation will continue throughout the week as you discuss and consider each others’ AML/CFT regimes and issues of mutual concern in implementing the FATF Recommendations.
I wish you a successful meeting and all the best in your future work.