The Anti-Money Laundering Compliance Journey
There is indication it has not been an easy journey to date for AML reporting entities in New Zealand, especially those included in the Phase 2 of the Anti-Money Laundering and Counter Terrorism Financing [AML/CFT] Act 2009. Their ability to appreciate, comprehend and implement the obligations now placed upon them as reporting entities has faced a number of practical and foreseeable hurdles.
But to date, they have not been alone in their journey. The Department of Internal Affairs (DIA) – the government agency responsible for managing and monitoring Phase 2 adherence of the compliance requirements – has provided meaningful guidance and support. More importantly on a level which has not previously been seen in New Zealand.
From personal experience as an AML compliance consultant working with these sectors, both phase 1 and Phase 2 of the Act, I have noted there has been an incredibly positive and committed adherence to these somewhat ‘scary’ AML compliance obligations. Industry comments that Phase 2 professionals are ‘dragging their heals’ is disappointing.
It is clear there is a concerted effort by the DIA to manage and support the Phase 2 entities. The trebling of DIA staff numbers for monitoring AML compliance and their intention to share information across relevant and interested government sectors (Financial Intelligence Unit, New Zealand Police etc) is good evidence of the DIA’s initiative-taking approach to the issue of money laundering and terrorism financing. Similarly, there is greater chance that those not meeting their obligations will face financial penalties, enforcement action and reputational damage.
But we need to remember, just because these sectors are finding it difficult, does not automatically suggest they are ‘dragging their heels’ on AML compliance. Afterall, the need to conduct a business risk assessment, establish compliance policies, manage client onboarding; carry out identity screening, client risk profiling, transaction monitoring, geography risks, case management, compliance reviews and prepare for audits can individually present sufficient reasons why AML compliance is a challenge.
Straight away these obligations indicate a great deal of work. Likewise, they provide no ‘easy out’ options; meaning they can be as equally challenging for those businesses that operate as an owner/operator model to those businesses that operate with various branches or offices across the country.
Therefore, criticism of their approaches is not only unhelpful, unnerving, and detrimental to New Zealand’s pending inspection next year by the global watchdog on the subject – the Financial Action Task Force (FATF) – it is also rude and not the Kiwi way. We are dealing with professionals in their sectors, so just as we don’t seek to offend the behaviour and actions of teachers and nurses, we should refrain from describing the inactions of these Phase 2 business professionals as ‘below standard’, as ‘over exaggerated’ in terms of their adherence to the obligations or as ‘slow learners’.
It was a challenge to expect these entities to be up and running at once (although sector by sector) in such a brief period, that is why the DIA has taken the overt stance of supporting them where ever practicable.
When the audit becomes due, the auditor will examine the policies, procedures and controls that were in place over the past two years. Therefore, these professional entities need to be aware, constantly, that they must meet their obligations.
So, what is the solution?
Supporting Phase 2 professionals taking their obligations seriously to meet their compliance obligations is the best starting point – not simply discrediting them. The consequences of a failure to meet such obligations are well appreciated and repeating these to these professionals is patronising. Whilst many may feel the approach is unfair, in that there is limited evidence as to why they should be included in the legislation at all, they are aware of the severe regulatory penalties if they turn a blind-eye to requirements.
Instead a supportive and collaborated approach between Phase 2 entities and compliance professionals would be more fruitful in addressing their challenges. Best practice guidance from the regulators would help lessen the scope of advice and criticism being mandated in New Zealand against these Phase 2 and various Phase 1 entities. Afterall, as New Zealander’s are we not here to make New Zealand a safe and enjoyable place to live and work?
Surely, the best approach now is to lessen the criticism of such entities – not to kick them when they are down – but to assist them by providing a helping hand, addressing the issues that are causing them problems and assisting them to embed AML/CFT compliance seamlessly into day-to-day business practice.
About the Author: Dr
Nicholas Gilmour is an Executive Consultant at AML360 – a global AML compliance
solution provider that has been operating for over 5 years.
Nicholas is a frequent author on diverse topics relating to
AML/CFT compliance to promote a healthy and supportive AML
culture. Having worked with businesses around the world,
Nicholas is passionate about strengthening AML/CFT controls
to increase safety and wellbeing for all.