Internal Affairs takes action against a money remitter

13 December 2017

The Department of Internal Affairs has filed civil proceedings in the Auckland High Court against an Auckland-based money remitter, Jin Yuan Finance Limited (company number 4083558), under anti-money laundering law.

This is the third civil proceedings to be filed since the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act) took effect on 30 June 2013.

The Department issued a formal warning to Jin Yuan Finance Limited in July 2015. It is not alleged that Jin Yuan Finance Limited was actually involved in money laundering or the financing of terrorism. Rather, the Department alleges that Jin Yuan Finance Limited failed to meet AML/CFT Act requirements involving customer due diligence, account monitoring, record keeping, the reporting of suspicious transactions and failed to establish, implement and maintain an effective AML/CFT programme.

The Department is committed to detecting and deterring potential money laundering and terrorism financing; its role is to ensure certain financial institutions, including money remitters, meet their obligations under the AML/CFT Act. The obligations require these businesses to have robust processes in place to protect them from misuse. When a financial institution continues to fail in meeting their obligations under the AML/CFT Act the Department can and will take action.

As this matter is before the High Court, the Department cannot comment further at this time.

Ends

The Act seeks to detect and deter potential money laundering and terrorism financing. Enforcement of the Act contributes to public confidence in New Zealand’s financial system, and puts New Zealand in line with international anti-money laundering and countering financing of terrorism (AML/CFT) standards. The Act places obligations on New Zealand’s financial service providers and casinos, known as reporting entities, to detect and deter money laundering and terrorism financing (ML/FT).

2. What is a reporting entity required to do to comply with the Act?

A reporting entity is first required to assess the risk of ML/FT that it may reasonably expect to face in the course of its business. A reporting entity is then required to establish, implement and maintain an AML/CFT programme which includes adequate and effective procedures, policies and controls for managing and mitigating the ML/FT risk. The requirements of an AML/CFT programme include staff training and vetting, customer due diligence, account monitoring and suspicious transaction reporting, as well as obligations relating to record keeping, review, audit and submission of an annual report.

3. What is customer due diligence?

Customer due diligence (CDD) is a cornerstone of an AML/CFT programme. CDD is the process through which a reporting entity develops an understanding about its customers and the risks they pose to the business. CDD involves gathering and verifying information about a customer’s identity, beneficial owners or representatives, as well as other information, depending on the nature of the business relationship and the level of risk involved.

4. What is account monitoring?

Account monitoring involves reviewing a customer’s account activity and transaction behaviour. This requires a risk-based approach and consideration of the reporting entity’s knowledge about a customer, their business, transaction history and the type of CDD undertaken when the relationship was established. Account monitoring allows a reporting entity to identify grounds for reporting suspicious transactions to the Police Financial Intelligence Unit.

5. What is record keeping?

The record-keeping obligations of the AML/CFT Act require a reporting entity to keep records relating to their customers and the transactions that they undertake. These records must enable all transactions to be fully reconstructed at any time. For complex, unusually large or patterned transactions, there are further requirements to examine them in detail and keep written findings.

6. What obligations are on reporting entities in regards suspicious transaction reporting?

A reporting entity must, as soon as practicable, but no later than 3 working days after objectively forming suspicion, report the transaction or proposed transaction to the Police Financial Intelligence Unit.

7. What conduct constitutes a civil liability act under the AML/CFT Act?

A civil liability act occurs when a reporting entity fails to comply with any of the following:

· Fails to conduct customer due diligence as required by subpart 1 of Part 2 of the Act (section 78(a) of the Act).

· Fails to adequately monitor accounts and transactions (section 78(b) of the Act).

· Fails to keep records in accordance with the requirements of subpart 3 of Part 2 of the Act (section 78(e) of the Act).

· Fails to establish, implement, or maintain an AML/CFT programme (section 78(f) of the Act).

· Fails to ensure that its branches and subsidiaries comply with the relevant AML/CFT requirements (section 78(g) of the Act).

8. Who monitors reporting entities for compliance with their obligations under the Act?

The Act has three supervisory agencies in New Zealand: the Reserve Bank, the Financial Markets Authority (FMA) and the Department of Internal Affairs.

· The Reserve Bank supervises registered banks, life insurers and non-bank deposit takers.

· The FMA supervises issuers of securities, licensed supervisors, fund managers, brokers and custodians, financial advisers, derivatives issuers, DIMS providers and peer to peer lending and equity crowd funding service providers.

· The Department supervises casinos, non-deposit taking lenders, money changers, money remitters, payroll remitters, debt collectors, factors, financial leasors, safe deposit box vaults, non-bank credit card providers, stored value card providers and cash transporters, and any other reporting entities not supervised by the Reserve Bank or the FMA.