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Proposed Framework To Prevent Money Laundering

Proposed framework to prevent money laundering and terrorism financing

Associate Justice Minister Clayton Cosgrove today released the third and final discussion document on proposals to prevent money laundering and terrorist financing.

The discussion documents, all released since August last year, outline proposed regulatory changes to enable New Zealand to meet its Financial Action Task Force (FATF) obligations.

FATF is an inter-governmental body that sets international standards for combating money laundering and terrorist financing. Its 33 members include New Zealand, the United States, Great Britain, Canada and Australia.

Mr Cosgrove said upgrading the security measures to prevent money laundering in this country was important domestically, as well as internationally.

"New Zealand's stable financial system makes it attractive for international criminals to deposit funds here and then move the money to other jurisdictions, so we must not be a weak target," he said. "Money laundering also occurs here, primarily by drug dealers, so these measures are important for making our communities safer."

Mr Cosgrove said the earlier discussion rounds sought feedback on the FATF compliance requirements, and the third seeks comment on the proposed framework for monitoring and enforcing businesses' compliance with those requirements.

In response to submissions raising concerns about compliance costs, the proposed framework outlined in the third discussion document minimises compliance costs by using existing regulatory frameworks where possible, he said.

Mr Cosgrove said the Government is therefore proposing the most cost-effective, business-friendly option.

"Our aim is to minimise costs by using existing regulatory arrangements rather than creating a new agency to carry out this vital work," he said. "For example, it is proposed that the Reserve Bank, the Securities Commission and the Department of Internal Affairs supervise the businesses they already regulate for other purposes." The Government plans to introduce the proposed framework in two stages to allow more time to consult with industry over the supervisory requirements.

Financial institutions and casinos will be the first group of businesses covered by the new requirements. Other businesses, including lawyers, accountants, and real estate agents, will be not be covered until the second stage, although they will remain subject to their existing legal obligations to prevent money laundering and terrorist financing. “These groups have strong industry associations that may be capable of assuming the new supervisory functions,” said Mr Cosgrove. “We want to work with those industry associations to determine how to utilise their industry expertise in the new framework to stop duplication, and prevent any wasting of time and money."

Mr Cosgrove said the approach is also broadly consistent with the Australian reform process currently underway across the Tasman.

The document Anti-Money Laundering And Countering The Financing Of Terrorism: Supervisory Framework is available on the Ministry of Justice's website at www.justice.govt.nz and submissions close on 30 November 2006.

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