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Reserve Bank updates its assessment of money laundering

Date 7 April 2017

Reserve Bank updates its assessment of money laundering and terrorism financing risks

The Reserve Bank today published an updated assessment of the money laundering and terrorism financing risks that face the financial sector.

Head of Prudential Supervision Toby Fiennes said: “The sector risk assessment is designed to help financial institutions to better understand their own exposure to money laundering and terrorist financing risks.”

The risk rating for the banking sector is in line with similar international assessments. It is rated high risk largely due to factors such as the wide accessibility and availability of banks, the global nature of some banking products, and the volume of transactions (including cash) that banks handle.

The Reserve Bank is responsible for supervising compliance by registered banks, non-bank deposit takers and life insurers with the Anti-Money Laundering and Countering Financing of Terrorism Act (AMLCFT Act), and requires supervised institutions to put processes and systems in place to manage risks that are identified.

“We expect that after reading the Sector Risk Assessment 2017, the institutions supervised by the Reserve Bank will update their own written risk assessments,” Mr Fiennes said

The banking sector continues to have a relatively high potential risk, because money launderers and terrorist financiers are more likely to target financial institutions in that sector, rather than targeting in other sectors.

“The bank sector risk rating hasn’t changed since the Reserve Bank’s last assessment, but more detail has been added about the different risks potentially experienced by New Zealand’s retail-focused banks compared with commercial and business banking or wholesale and institutional banking,” Mr Fiennes said.

The non-bank deposit taker sector is rated as having an overall ‘medium’ potential risk. In the 2017 update, more attention has been given to the money laundering and terrorist financing risks potentially experienced by New Zealand’s credit unions, which have a strong domestic customer focus. Credit Unions’ products and services are becoming more ‘bank like’ and, as a result, the credit union sector has been upgraded to a medium risk rating.

Overall, the life insurance sector has not changed greatly in terms of inherent money laundering and terrorist financing risk. It is rated low risk.

The assessment updates work previously published in 2011. The ratings don’t reflect on the financial stability of these sectors or the institutions within them, but provide an overview of the relative inherent risk of money laundering and terrorist financing. The assessment covers inherent risk and doesn’t take into account any work done by each financial institution to reduce its own individual risks.


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