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Need for more counter-terrorist regulation

Hon Phil Goff - Minister of Justice

12 August 2005

Report confirms need for more counter-terrorist regulation

An international evaluation of New Zealand's financial sector has confirmed that planned regulation announced early this year is needed to fully safeguard against money laundering and terrorist financing, Justice Minister Phil Goff said today.

"In the 1980's and 1990's, New Zealand extensively deregulated its financial sector. The Financial Action Task Force (FATF) which has evaluated our laws now confirms that some re-regulation will be required in order to meet the strict FATF standards deemed necessary in an era when there are pronounced concerns about money-laundering by transnational criminal groups and diversion of money to terrorist groups," Mr Goff said.

"The Terrorism Suppression Amendment Act, passed in June has already brought us into full compliance with FATF standards on prohibitions against financing terrorist organisations or individuals.

"The Criminal Proceeds and Instruments Bill introduced in June deals with the proceeds of crime and addresses recommendations made in this area.

"The range of actions I announced in February including new legislation to implement appropriate controls over the financial sector will meet FATF's other requirements.

"A discussion paper is in the process of being circulated to the financial sector outlining the new proposals. The sector will not necessarily welcome greater regulation as it imposes administrative costs. But I expect it to recognise that New Zealand must take action to comply with international standards. Not to do so would be to risk damage to New Zealand's financial and political reputation. Officials will be consulting closely with the financial sector in developing legislation in this field.

"New Zealand volunteered to be one of the first jurisdictions to undergo an evaluation against the FATF standards. The evaluation was done by the Asia-Pacific Group on Money Laundering which operates under the umbrella of the FATF. New Zealand has been a member of the FATF since 1990.

"There is currently no specific evidence that New Zealand is being used by international crime or terrorist groups to launder money or finance terrorism. New Zealand also rates as the second least corrupt country in the world. However no country can afford to be complacent.

"New Zealand already has strong criminal laws against money laundering and terrorism financing in the Crimes Act, Misuse of Drugs Act, and Terrorism Suppression Act, but we need to do more to ensure that our financial system is fully safeguarded against being exploited by trans-national criminals."

"The FATF process is designed to ensure that all like-minded countries are consistent in the regulation of their financial sectors against terrorism and crime, so that there are no weak links. The UN Security Council has also passed a resolution in late July strongly urging countries to comply with FATF standards.

"The decisions made by Government and announced in February will ensure that New Zealand fully complies with FATF requirements. The resources which will be legislated for are:

„h A comprehensive monitoring framework will be put in place to ensure all financial institutions meet standards for countering money laundering and terrorist financing;
„h Persons providing money transfer or currency change services will be subject to a registration regime;
„h Statutory requirements for financial institutions to comply with customer due diligence, and to implement internal anti-money laundering systems and procedures. Detailed obligations will be set out in an enforceable code of practice;
„h Financial institutions will be required to obtain, verify and retain information concerning the identity of the originator of wire transfers through an amendment to the Financial Transactions Reporting Act (1996); and,
„h Officials will also consider the practicability of directors and senior managers of financial institutions in the insurance and securities sectors being evaluated to ensure that they meet the 'fit and proper persons' criteria, which would bring them into line with the banking sector.

"These measures reflect and reinforce New Zealand's commitment to playing its role within the international community to defeat money laundering and terrorist financing," Mr Goff said.

A summary of the FATF report, and the discussion paper seeking financial sector comment on the government's proposals, are available from the Ministry of Justice or at www.justice.govt.nz


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