Anti-Money Laundering and
Countering the Financing of Terrorism

Submissions on the second discussion document regarding new anti-money laundering proposals

New Zealand Bankers' Association

SUBMISSION TO THE FATF INTER-AGENCY WORKING GROUP ON

ANTI-MONEY LAUNDERING AND COUNTERING THE FINANCING OF TERRORISM: NEW ZEALAND’S COMPLIANCE WITH FATF RECOMMENDATIONS

SECOND DISCUSSION DOCUMENT JUNE 2006

Table Of Contents

INTRODUCTION
Partnership
Proportionality
Effective compliance
Consultation on the workability of preliminary proposals

PART ONE
Relevance of the FATF Recommendations to New Zealand
Risk
Nature of risk-based approach
The risk-based approach and a level playing field
Benchmarks
Monitoring compliance
Approach to enforcement
Information about money laundering risks
Compliance Costs
Initial implementation costs
On going costs
Cost savings by implementing same model as foreign parent
Costs of meeting foreign legislative requirements as subsidiary
Related businesses
Medium sized business
The AML Supervisory Framework
Supervisory models
FIU
Senior Management Responsibility
Legislative framework
Guiding Principles
Key issues and constraints
Market distortion and competitive disadvantage
Legislative models
Hybrid of options 2 and 3
Option 1
Option 2
Option 3
Timeframe for implementation
Transitional period
Phasing in
Consistency with existing law and client obligations
Human Rights Act – Discriminatory practices
Privacy Act
Public Awareness

PART TWO – PRELIMINARY PROPOSALS
General approach
Consideration of specific FATF Recommendations
FATF RECOMMENDATION 5 – Customer Due Diligence 23
Credibility of Government agency interfaces
Re-verification where the financial institution has doubts about the veracity or adequacy of previously obtained customer identification data.
Identification and verification of identity of all facility holders – no matter the number of facility holders involved with any account and no matter the type of account.
Identification (if not the facility holder) and the undertaking of reasonable measures to verify the identity of beneficial owners.
Verification of the authority/power to act on behalf of the legal person and/or arrangement.
Obtaining information on the purpose and intended nature of the business relationship.
Conducting ongoing due diligence on the business relationship and associated transactions to ensure consistency with the person’s/institution’s knowledge of the customer.
Verification of identity when a person acts on behalf of another person in relation to all transactions.
Extending the CDD obligations to non-cash transactions.
Cash and threshold trigger compliance not occasional or on behalf of distinction
Not commencing a transaction and/or ending a business relationship where identification and verification of identity cannot be undertaken.
Retrospective application of CDD requirements to existing customers subject to risk and materiality
Legislative Enhancements
Express ban on anonymous and fictitious accounts subject to an allowance for numbered accounts.
FATF RECOMMENDATION 6 – Politically Exposed Persons (PEPs)
FATF RECOMMENDATION 7 – Cross border correspondent banking
FATF RECOMMENDATION 8 - New Technologies and Non-Face-to-Face Business Relationships and Transactions
Database access
FATF RECOMMENDATION 9 – Reliance on intermediaries or other third parties to perform customer due diligence or introduce business
FATF RECOMMENDATION 10 - Record keeping
FATF RECOMMENDATION 11 – Complex unusual large transactions and unusual patterns of transactions
FATF RECOMMENDATION 13-Reporting suspicious transactions
SPECIAL RECOMMENDATION IV-Reporting suspicious transactions related to terrorism
Include a requirement in the new Act to report suspicious transactions relevant to the enforcement of the TSA.
Transaction or activity based reporting
Suspicious report form
RECOMMENDATION 15-AML/CFT Policies, Practices and Programmes
RECOMMENDATION 18-Shell Banks
RECOMMENDATION 21 - Countries that do not or insufficiently comply with the FATF Recommendations (Business relationships and transactions)
RECOMMENDATION 22-Countries that do not or insufficiently comply with the FATF Recommendations (Overseas branches and subsidiaries)
RECOMMENDATION 25-Competent authorities to establish guidelines and provide feedback