NZ Government Must Invest In Financial Crime Tech Before It Can Meet Statutory Obligations To Deter Financial Crime

Asia Pacific AML, Kerry Grass *

With elections commencing in less than 12-months, New Zealanders are starting to hear rhetoric pledges from politicians that their party will “Get tough on gangs, organised crime and transnational crime”. In this article I will demonstrate such political promises are not possible without use of system capabilities to detect, deter, report and monitor the threats arising from financial crime. The most important defence tool missing from the government’s infrastructure toolbox is financial crime technology. Omitting basic crime fighting tools from the government’s arsenal demonstrates an inability to meet the statutory function of protecting New Zealanders from transnational financial crime risks.

What Is the Dollar Value From Serious Fraud and Corruption?

New Zealand’s Serious Fraud Office estimates between $500 million and $5.04 billion could be lost every year from New Zealand’s public sector.

These astronomical figures beg the question – ‘Why has New Zealand’s government operated without adequate defence systems such as financial crime technology’?

Turning The Clock Back 25-years

My personal desire to see New Zealand reduce threats from white-collar criminals began 25 years ago. This is when I commenced employment as an Investigator for New Zealand’s National Enforcement Unit (the NEU). The NEU sat under the umbrella of the Ministry of Economic Development.

During that 3-year period, being early 2000 to late 2003, I became acutely aware of New Zealand’s lack of resourcing to manage complaints involving multi-million-dollar frauds. New Zealand’s Serious Fraud Office was operating with resources that resulted in a mere 3% to 5% of complaints reaching the ‘investigation’ stage.

If 95% of complaints made to the Serious Fraud result in no investigation, then financial criminals will obviously flock to New Zealand and/or target New Zealand from offshore. These financial criminals include sophisticated transnational criminal groups.

Fast-forward 25-years and New Zealand’s Serious Fraud Office is achieving a maximum investigation level of 8% of complaints and a 1% prosecution rate. These figures clearly demonstrate the Serious Fraud Office is not meeting its statutory objectives to (a) detect serious or complex fraud, (b) investigate serious of complex fraud and (c) prosecute serious or complex fraud.

Inadequate Defence Systems Attract Financial Crime

Financial crime defence systems are designed to detect, monitor and report on risks linked to financial crime. Operating with inadequate defence systems to deter financial crime will always attract financial criminals.

Given that the conduct of financial criminals is designed to harm and/or destroy the livelihood of innocent parties, why would New Zealand government neglect to implement adequate resourcing to prevent such harm?

In today’s technological world, Cloud technology has significantly reduced the cost of financial crime technology. Electing to not invest in financial crime technology further demonstrates turning a blind-eye to the harms that arise from financial crime.

History Repeats Itself

Commencing 25-years ago, I began to track New Zealand’s efforts to combat financial crime, most particularly the introduction of laws designed for anti-money laundering compliance and combating the financing of terrorism. I have a lot to write about. And none of it is good.

I am continuing to track New Zealand’s status and the results are consistently demonstrating New Zealand’s inability to prevent serious organised crime, transnational crime and corruption, from occurring within and/or through New Zealand.

Based on the level of significant weaknesses in New Zealand’s infrastructure to deter or prevent serious financial crime, I am not confident that the government of the day has an appetite to fix the gaps or plug the holes in the legislative instruments that it created.

Transparency and accountability are vital to demonstrate financial crime risks and and the harms arising from transnational criminal groups, can be adequately managed.

Based on recent results received under Official Information Act requests, New Zealand government agencies are confirming they continue to operate without any financial crime technology.

Given that New Zealand is reportedly losing up to billions a year in fraud and/or corruption, how can determinations to not invest in financial crime technology be justified?

Without adequate financial crime technology, and/or without any financial crime technology, how is it possible for New Zealand government to meets its statutory obligations under the New Zealand’s Anti-Money Laundering and Countering Financing of Terrorism Act? The answer is – it is not possible.

* ABOUT KERRY GRASS

Spanning a career of 25+ years in financial crime compliance, Kerry advises in the practical application of anti-money laundering compliance laws. She has worked with government and the private sector in New Zealand, Australia and the United Kingdom and is the founder of compliance software known as AML360™.

Qualifications

• International Diploma in Anti-Money Laundering (2006, Cass Business School London)
• Diploma in Financial Markets (2006, Kaplan Business School, Australia)
• Graduate Certificate in Applied Finance (2007, Kaplan Business School, Australia)

University papers

• Criminal Law (Massey University, NZ)
• Business Law (Massey University, NZ)
• Employment Law (Massey University, University)
• Fraud Prevention (Charles Sturt University, Canberra, Australia).

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