Anti-money laundering and countering terrorist financing

By the Associate Minister of Justice, Clayton Cosgrove

THE next stage in the development of the proposed anti-money laundering and countering terrorist financing regulatory reforms is nearing completion by the Ministry of Justice. These reforms are required by virtue of New Zealand’s membership in the Financial Action Task Force (FATF) and by a number of other international conventions.

The FAFT is an inter-governmental body that sets international standards for anti-money laundering and countering the financing of terrorism. Other members of FATF include Australia, Canada, Great Britain and the United States.

A discussion document about the FATF reforms was released in August 2005, and submissions were sought from financial institutions and other affected professional groups. Many submissions were made and all raised important issues, which officials have carefully considered.

A further round of discussions with stakeholders is planned to address some of those issues. It will also provide more detail on these important reforms as well as the likely impact for the way financial institutions and other affected industries will be required to do business in the light of the reforms.

The NZLS provided a comprehensive submission on the first document, which officials found very helpful. I look forward to the society’s continued participation in the ongoing consultation.

I have followed with interest recent LawTalk articles about the possible compliance costs for lawyers. These articles drew on the UK experience and highlighted the costs faced by law firms and lawyers in the wake of the anti-money laundering and countering terrorist financing reforms there. However, it is important to note that the experience there is based on factors that are not present in New Zealand.

UK reforms in this area are not based solely on FATF standards but also on European Union directives. Some of these directives impose higher or even different standards than does the FATF, given the variety of legal systems in the EU that must be harmonised. Cost comparisons with the EU will not give industry in New Zealand a necessarily accurate snapshot of cost implications here. I am hoping, through the next round of consultation, to elicit more information from your members and other professions, as well as industry groups, on cost implications for their sectors.

I want to make it clear that the Government is sensitive to possible compliance burdens for particular sectors arising from these proposals and gives a high priority to minimising those costs wherever possible, while still ensuring that we meet our international obligations. With this in mind, we are encouraging a detailed engagement with stakeholders and their representatives, including the NZLS.

The proposed legislation to meet our FATF obligations is expected to be introduced to the House in early 2007. I look forward to a continuing dialogue with stakeholders up until then.