Financial Crime

Best Practice Guidelines for Financial Institutions

Issued September 2005 by New Zealand Police Financial Intelligence Unit,
National Bureau of Criminal Intelligence (NBCI)

For the information of mainstream banking, lending, deposit taking, insurance, retail investment, casinos, lawyers, real estate agents and sharebrokers.

Updated 3 June 2008: Another update has been made to the section on Locations of Specific Concern (page 65). Please also refer to FATF Statement dated February 2008.

Updated 23 June 2006:   Another update has been made to the section on Locations of Specific Concern (page 65): Nigeria has been Removed from the NCCT list.

Updated 14 March 2006:   An update has been made to the section on Locations of Specific Concern (page 65).

Updated 21 October 2005:   A correction has been made to the section on Alternative Remittance Systems (page 63).

Update 7 November 2005:   The Financial Action Task Force on Money Laundering (FATF) have removed Nauru from the list of non-cooperative countries and territories (NCCTs) after Nauru abolished its 400 shell banks, therefore, removing the main money laundering risk. Myanmar and Nigeria remain on the list of NCCTs, although, the FATF recognise that they have adopted many necessary legal reforms and encouraged further implementation. In the meantime, the FATF continues to call on financial institutions to scrutinise transactions with persons, businesses, or banks in these countries, as per Recommendation 21.

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These guidelines have been prepared by Police to assist New Zealand financial institutions in complying with the requirements of the Financial Transactions Reporting Act 1996. These guidelines replace the previous Guidance Notes for Financial Institutions.

Further amemndments to legislation is planned relating to money laundering and terrorist financing legislation in New Zealand. These guidelines will be updated again, once the proposed legislation is finalised.

In the meantime, it should be remembered that the definitive source of information on the law must always be the statutes and regulations themselves. If in doubt, the statute should be referred to or legal advice sought.

Update 7 November 2005 The Financial Action Task Force on Money Laundering (FATF) have removed Nauru from the list of non-cooperative countries and territories (NCCTs) after Nauru abolished its 400 shell banks, therefore, removing the main money laundering risk. Myanmar and Nigeria remain on the list of NCCTs, although, the FATF recognise that they have adopted many necessary legal reforms and encouraged further implementation. In the meantime, the FATF continues to call on financial institutions to scrutinise transactions with persons, businesses, or banks in these countries, as per Recommendation 21.

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Table of contents

FOREWORD

INTRODUCTION

THE LAW ON MONEY LAUNDERING
Interpretative notes
Crimes Act 1961
Money Laundering
Financial Transactions Reporting Act 1996
Obligations on financial institutions to verify identity
Financial institutions to report suspicious transactions
Suspicious transaction reports not to be disclosed
Obligation to keep transaction records
Obligation to keep verification records
Liability of employers and principals
Proceeds of Crime Act 1991
Mutual Assistance in Criminal Matters Act 1992
Main points of the money laundering offence
Crown v Wallace & Others

TERMINOLOGY
Crimes Act 1961
Financial Transactions Reporting Act 1996

CUSTOMER VERIFICATION
Verification requirements
Procedures for verifying identity
Summary of customer verification for New Zealand financial institutions

SUSPICIOUS TRANSACTION GUIDELINES
Introduction
Recognising money laundering
What is money laundering?
Sources of laundered money
The three stages of money laundering
Placement
Layering
Integration
Recognising suspicious transactions
What is a suspicious transaction?
Potential indicators of suspicious transactions

GENERAL MAINSTREAM BANKING AND INVESTMENT
Examples of suspicious transactions
Account transactions
Cash transactions
Complex and unusually large transactions
Customer characteristics
Deposits and withdrawals
International transactions
Off-shore international activity
Wire transfers
Investment related transactions
Retail investment products
Sales and dealing staff
New business
Intermediaries
Dealing patterns
Abnormal transactions
Settlements
Payment
Delivery
Disposition
Secured and unsecured lending
Shell companies

LICENSED CASINOS
Examples of suspicious transactions

PRACTISING LAWYERS
Examples of suspicious transactions

REAL ESTATE AGENTS
Examples of suspicious transactions

SUSPICION CHECKLIST
Customer transactions
Investment transactions
Employees/agents and money laundering

REPORTING MONEY LAUNDERING
When to report
Who to report to
What to report
How to report
Oral reporting
Auditors

OFFENCES
Suspicious transaction reporting
Customer verification
Tipping off
Record keeping
Liability of employers and principals

PROTECTIONS
Protection of persons reporting suspicious transactions
Immunity from liability for disclosure of information
Identity protection when reporting suspicious transactions
Legal professional privilege

DEFENCES
Customer verification
Employers and principals
Privacy Act, search warrants, contractual obligations
Application of the Privacy Act (S 28)
Search warrants (S 44 to 51)
Non-compliance not excused by contractual obligations (S 55)

GENERAL INFORMATION
Alternative remittance systems
Chart showing process of alternative remittance systems
Chart showing the use of mainstream banking
Cash couriers
Locations of specific concern
Politically exposed persons (PEPs)

TERRORIST FINANCING
Financial Transactions Reporting Act 1996
Terrorism Suppression Act 2002
Terrorist designations
When to submit a Suspicious Property Report (SPR)
When to submit a Suspicious Transaction Report (STR)
How to determine a match
Dealing with property
Funding terrorism
Detecting terrorist financing
Sources of terrorist funding
Community fundraising
Revenue-generating crime
State-sponsored terrorism
Suggested process for suspected matches on terrorist lists

Appendix A: Suspicious Transaction Report (STR) Form
Appendix B: Suspicious Property Report (SPR) Form
Appendix C: Financial Transactions Reporting Act 1996 Schedule
Appendix D: Terrorism Suppression Act 2002 Schedule

INDEX

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