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Anti Money-Laundering Legislation to Hit Kiwi SME Businesses

Anti Money-Laundering Legislation to Hit Kiwi SME Businesses From Next Month

The number of Kiwi businesses that need to comply with AML / CFT (Anti-Money Laundering and combating the Financing of Terrorism) legislation will quadruple overnight.

From July 1, legislative requirements will be imposed on the legal, real estate, sports betting, and high-value goods industries (jewellery, precious metals, precious stones, watches, motor vehicles, boats, art or antiques where they take cash payments of $15,000 or more).

The impact of failing to comply with this global legislation can have severe consequences. This includes hefty fines or a jail term.

Rapid developments in financial information, technology and communication allow money to move anywhere in the world with speed and ease. This makes the task of combating money-laundering more urgent than ever. The cost of AML is estimated to be US $800 billion to US $2 trillion globally.

Businesses must know who their clients are and where their funds have come from. It is not enough to park the funds in a trust account without inquiring about the origins.

One of the most effective means of managing the compliance risks associated with AML/ CFT and any other data management regulations is to work with partners who incorporate the highest levels of data quality management into their business model by design.

Many NZ businesses do not comply with AML

Like fraud, money laundering is more pervasive than we would expect. Incidents of Money Laundering are seldom reported publicly in order to protect privacy and avoid risks of undue prejudice. Five New Zealand businesses have been formally cautioned by the Financial Markets Authority (FMA) for anti-money laundering failures. These businesses will now face further monitoring visits and serious repercussions if they don't improve.

During the past year alone one financial services group working in New Zealand was fined NZ $5.3m for multiple breaches of the AML/CFT Act (Combating the Financing of Terrorism) and the Department of Internal Affairs (DIA) has sought a NZ $2.6m fine against another NZ company.

About anti-money laundering

Anti-money laundering and countering the financing of terrorism comes from the AML/CFT Act 2009. It’s the body of rules that compel companies in New Zealand to prove that they are taking adequate and effective measures to prevent money laundering and terrorist financing from taking place in their business, according to Fiducia.

The Act 2009 seeks to contribute to public confidence in New Zealand's financial system and bring New Zealand into line with international standards to detect and deter money laundering and terrorism financing.

The estimated amount of money laundered globally in one year is two to five per cent of global GDP, or US $800 billion – US $2 trillion.

The New Zealand Police Financial Intelligence Unit (FIU) estimates that that the size of financial fraud in NZ $1.35 billion, but the actual transactional value is thought to be several times higher.

Vallum makes compliance easy

A start-up data company in New Zealand, Vallum.Insure, is at the forefront of enabling excellence in data risk management including security and privacy as well as AML/CFT.

As technology is evolving so rapidly it’s hard to keep up. It’s easy to envisage a future where regulatory change and adaptation becomes a constant feature for all businesses, small and large. But although regulation unquestionably serves the public good, it often lacks finesse and nuance. Something like using a sledgehammer to fasten a nail.

The key lies in working with partners who can be trusted for the integrity of their data and who represent a first line of defence in ensuring best practice and compliance.

When Vallum talks about risk, it includes areas such as legal compliance so that companies can develop new and more competitive product offerings.

The Vallum platform continually cross validates data to ensure that it is valid and trustworthy. This means that there is no need for the data to be validated again by businesses. What’s more Vallum incorporates practices that exceed regulatory requirements for data helping to future proof their customers’ business.

To ensure that the Vallum platform provides best-of-breed capabilities, the core platform utilises AML technology from partners such as compliance specialists, Fiducia. This provides guidance to business owners and gives insight to insurers, thus increasing business compliance and reducing insurance fraud, all of which lead ultimately to lower insurance costs.


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