The official warning issued to JP Morgan NZ (JPMNZ) for breaching anti-money laundering rules last week could be the first of many to hit the industry as regulators move into enforcement mode, according to consultancy firm AML Solutions.
Martin Dilly, AML Solutions director, said while regulators have allowed industry participants a period of adjustment since the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) regime launched in 2013, the JPMNZ warning heralds the next phase of policing the legislation.
“I wouldn’t be surprised to see a steady flow [of warnings],” Dilly said.
Last week, the Reserve Bank of NZ (RBNZ) yellow-carded JPMNZ after finding “reasonable grounds to believe that for a period of approximately four months in 2013, JPMNZ’s AML/CFT risk assessment did not fully meet all the requirements of section 58(3) of the Act.”
In a note sent to clients following the JPMNZ decision, AML Solutions said as well as marking the first official public AML/CFT warning, the RBNZ move highlighted the importance of risk assessment procedures.
“… we have seen a number of cases where reporting entities have utilised the risk methodology of an overseas parent company or simply adopted a risk assessment completed for the wider global group,” the AML note says. “In most cases these risk assessments do not comply with the requirements of the Act…”
Dilly said the Financial Action Task Force (FATF), the international body pushing global action on AML/CFT rules, is due to revisit New Zealand in 2018 “and it will be looking for enforcement”.
The RBNZ polices AML/CFT compliance for about 130 entities covering banks, insurance companies and non-bank deposit-takers. Meanwhile, the Department of Internal Affairs regulates the anti-money laundering regime for roughly 1,200 businesses including money-changers and casinos.
The Financial Markets Authority (FMA) is the AML/CFT regulator for a further 850 entities such as fund managers and financial advisers.
Richard Manthel, AML Solutions director, said the true scope of money-laundering in New Zealand is probably under-reported.
Manthel said the global volume of money-laundering “is trillions of dollars”.
He said New Zealand Police has seized about $55 million in assets related to money-laundering since the regime was introduced.
Manthel said around 12-14,000 suspicious transactions per year are reported to the NZ Police Financial Intelligence Unit goAML online reporting tool.