Police's Financial Intelligence Unit release report on money laundering, terrorism

An estimated $1.35 billion of criminal proceeds is generated for money laundering in New Zealand every year but the actual transactional value is thought to be several times higher, a new police report suggests.

The figures come as the New Zealand Police Financial Intelligence Unit (FIU) this week publishes an updated assessment of the risks the country faces from money laundering and terrorism financing.

The National Risk Assessment report replaces its predecessor from 2010 and is used along with Sector Risk Assessments, published by the Reserve Bank, the Department of Internal Affairs and the Financial Market Authority.

In its report, the FIU said $1.35b of domestic criminal proceeds is generated for laundering in New Zealand annually, excluding tax offending and overseas-based offences.

Of that, $750m comes from drug offending, $500m from fraud and $100m from other offences such as burglary.

The actual transactional value of money laundering, the report reads, is likely to be several times the $1.35b estimate, while it is estimated US$2 trillion is generated globally.

FIU manager Andrew Hill said: "Even in a comparably safe country like ours, money laundering and terrorism financing harms communities by enabling organised crime to flourish."

He said criminals overseas seeking to mask their illicit funds are also attracted by New Zealand's reputation as a safe and corruption-free country.

"We need businesses and service providers to appreciate how and why risks arise," Hill said.

"Recognising risk and not being complacent helps protect New Zealand's reputation and presents us as a good place to do lawful business."

Amendments to the Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT) since it was introduced in 2013 have seen changes to how financial crime is viewed.

An intention to conceal money laundering is no longer a requirement to prosecute, the minimum five-year imprisonment threshold for money laundering was removed, and increased reporting on transactions was introduced.

The Herald reported a year ago that financial entities are now required to report all international wire transfers of or over $1000 and all physical cash transactions of or over $10,000 to the FIU.

In November last year, banks and financial institutions were granted a grace period to comply with the new laws due to IT "complexities".

A deadline of July 1 this year was set due after it was discovered that automated systems would be non-compliant.

In April last year police also launched its first dedicated money laundering investigations team - a group of eight detectives and specialists.

The FIU's report also said criminals would use and abuse New Zealand's legal structures, which was a known money laundering threat.

Shell companies, limited partnerships or trusts could be used a vehicle for money laundering without any transactions actually occurring in New Zealand, the report reads.

Ponzi and investment frauds were also noted for being an abuse of trading and banking services.

Also mentioned in the report were criminal real estate transactions, which has been identified in the Australian, UK and US markets.

"Although transnational laundering through real estate has received a high degree of media interest in New Zealand, this typology has not been common in international requests to the FIU," the report said.

When addressing terrorism financing, the report said two types of offshore extremist groups pose a threat to New Zealand - those able to attract support with ideology and well resourced groups with established networks.

"The threat of radicalised individuals inspired by terrorist ideology is currently most notably manifested in religious extremism espoused by groups such as Da'esh (ISIS) or Al-Qaeda," the report said.

"However, it has also been associated with nationalist or other political causes which may resonate in particular communities."

The FIU said given the low level of domestic support for terrorist causes, it is more likely that this threat would manifest in New Zealand as "isolated disaffected individuals or small groups".

From the period when the AML/CFT Act was introduced until June 2017 the FIU received a total of 156 suspicious transaction reports (STR) possibly related to terrorism.

While a slight increase on previous reports, the number was only 0.392 per cent of all processed STR and a result of increased awareness of global terror threats, the FIU said.

Also highlighted was the rapid advance of technology, including payment and communication systems, which the FIU said was likely to continue to challenge law enforcement when fighting cyber crime. (via NZ Herald)