AML laws 'waste of time, money'

New Zealand financial advisers have put significant time and large amounts of money into complying with anti-money laundering legislation, but research indicates the regime is ineffective.

Wednesday, June 27th 2018, 6:00AM

by Susan Edmunds

Lawyers will be brought into the scope of the laws on July 1 in New Zealand.

But Ron Pol, author of the new study, in the international peer-reviewed Journal of Financial Crime, said intended crime prevention outcomes "hardly register".

"The standard AML/CFT model is a contender for the least effective policy/ regulatory/ enforcement intervention, ever, anywhere.”

His research found the rate of criminal funds intercepted ranged from 0.1 per cent to 3.3 per cent in New Zealand - but that rate was was based on official data excluding key areas of criminal funds.

Globally 0.2 per cent of criminal funds were stopped each year.

Adviser Murray Weatherston said the AML regime would have cost 10 times the amount of money that had been stopped.

"As with many policies, no one is really concerned about he cost, it's a good idea to do it, so you just have to do it."

He said it added significant work for advisers.

He had one potential client approach him who had sold a residential property and was considering investing the money in managed funds.

But when he discovered the level of documentation he would be required to track down and provide - including a copy of the trust's deed, all amendments to the trust's deed sine it was formed, details of all changes to trustees over that period, ID for all the current trustees and the shareholders of the company of one of the trustees - he decided it was too much bother and opted to buy another property, instead.

David Greenslade, managing director of Strategi, said the AML/CFT laws were only partially effective in stage one when they only applied to banks, finance companies and AFAs.

"The effectiveness was limited as there were still a host of other ways to launder money plus the supervisors and probably the Police FIU lacked staff resources to adequately follow up on suspicious transaction reports," he said.

"The changes that have been implemented since the inception of the act has started the improvement process. Rolling out phase two, which incorporates the likes of lawyers, accountants and real estate agents will help to progressively improve the effectiveness as the number of avenues for laundering money will be reduced."

He said it was unrealistic to expect money laundering would immediately be curtailed by the act.

"It will take a number of years and progressive enhancements to the regulations to successfully reduce the level of ML/FT to a significant extent. Additionally, money launderers and terrorist financiers are very innovative people and as one avenue to launder money closes, they will find a new one to use."

Gavin Austin of compliance firm ABC, said there was no way to measure the number of people who were put off conducting a suspect transaction because of the policy.

"You can't measure the deterrent factor."

TOMORROW, PART TWO: The FMA view

Tags: AML

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