The Act of Anti-Money Laundering & Countering Financing of Terrorism is designed to help deter and detect terrorism financing and money laundering. Under the law, every bank, real estate agent, lawyer, accountant, conveyancer, and entity providing certain financial services must verify the customer’s identity. In some cases, they can even monitor their account activity. This is done to make sure New Zealand is protected from financial crime, meet international obligations, and improve its financial reputation overseas.
The Impact Of The Law On Banks
All banks, as per the anti-money laundering law, should collect particular information from their customers to verify their address and identity. The same goes for people/businesses acting on behalf of the customers. The law is an extension to the previous one on customer identification requirements. As a result, customers now have to present more details about themselves than they used to in the past.
The banks should ask existing customers whether their current information is up to date. They may also ask their customers for additional information in case their account activity alters over time as well as how they intend to utilize their services and products. This is why collecting and verifying customer information requires more time in the present times.
What Is Money Laundering & Terrorism Financing?
Money laundering refers to the process of making money obtained from criminal activity appear to possess a legitimate source. The entire process involves several stages –
- Accumulation of money.
- Separation of the money from its original source.
- Mixing it with legitimately-earned funds.
- Funnelling back the money to its original source.
Numerous serious crimes, including bribery, corruption, arms trafficking, illegal gambling, illegal prostitution, robbery, fraud, and drug trafficking, are the reasons behind money laundering activity taking place all over the world. Criminals use several methods as well as levels of sophistication for making money acquired from the criminal activities appear legitimate. The terrorist organizations also move their funds to disguise the source, destination, and purpose. Terrorism financing involves funding terrorist groups and acts. This is why it is necessary to stop such activities from happening.
Steps To Counter Money Laundering As An Organization
#1 You will need to identify the AML compliance officer, who will be responsible for ensuring your obligations are met.
#2 You should identify your risks and form a compliance program. You can seek professional help in developing anti-money laundering programs.
#3 Use and update your compliance and risk assessment program. You may have to –
- Monitor the accounts of clients for any suspicious activity.
- Regularly review compliance and risk assessment programs.
- Have the compliance and risk assessment program audited every two years.
- Submit the annual report to the supervisor.
#4 You must employ strict customer verification policies.
#5 You should not refrain from reporting large cash transactions (above $10,000 in cash), suspicious activities, and wire transfers.
The Bottom Line
To protect against terrorism financing and money laundering, the New Zealand government had formed the Anti-Money Laundering & Countering Financing of Terrorism law. If the organizations are aware, alert, and report suspicious financial transactions to the authorities, such acts can be controlled significantly.