New Zealand Is Not Yet Capturing Alternative Remittance In Anti-Money Laundering Laws
New Zealand has not yet aligned its AML/CFT Act to the International Standards set by FATF to regulate Alternative Remittance Services.
Countries such as Australia, United Kingdom, Canada and the USA all provide regulations that explicitly capture Alternative Remittance. The legislative frameworks of those countries also provide separate reporting frameworks to capture both Conventional money or value transfer and Unconventional money or value transfer.
Though New Zealand's AML/CFT regime captures conventional money or value transfers that occur through a Wire Transfer, it does not capture unconventional methods of trading.
The problem with restricting money or value transfer services to Wire Transfers is that Alternative Remittance services do not need to rely on a Wire Transfer. Nor does a method of Alternative Remittance need to 'pass through' a financial institution or involve 'cross-border'.
This is where the anomaly clearly lies in New Zealand's AML/CFT Act. It is only catering to conventional money or value transfer services and not unconventional.
The NZ AML/CFT Act also limits its international money or value reporting framework to a 'Prescribed Transaction'. A Prescribed Transaction is defined as a 'Wire Transfer' (section 5 of the AML/CFT Act).
It is clear New Zealand's AML/CFT Act is weakened in its ability to detect or prevent the use of Alternative Remittance services that assist in the facilitation of terrorism financing and evasion of sanctions.
NZ AML/CFT Act Anamoly Already Known
During the 2021 Statutory Review of the NZ AML/CFT Act, the Ministry of Justice released a document and acknowledged the definition of 'Wire Transfer' did not capture 'Hawala'. (Hawala is another terminology used for 'Alternative Remittance' or 'Traditional Remittance'.)
The document states -
'However, under the current definitions of a wire transfer, this type of transaction is not explicitly captured as a wire transfer, and there are accordingly no specific CDD or PTR obligations for the transaction.."
Despite this recognition, no changes have been recommended to address this anomaly.
Use of the term 'Money Remittance'
Though the DIA AML/CFT Supervisor is purporting the NZ AML/CFT Act regulates 'money remitters', the reality is the AML/CFT Act has not yet defined 'money remittance' and nor does it define 'alternative money remittance'.
The use of the term 'money remittance' without the AML/CFT regime having a definition of money remittance, is only confusing the industry.
Underground Banking
One consequence of New Zealand failing to provide an AML/CFT regime that captures Alternative Remittance, is the increased use of underground banking channels.
As underground banking channels are where transnational criminals operate – it is time for New Zealand to plug this gap.
More on this topic will be reported.
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