Hon SIMON POWER (Minister of Justice)
: I move,
That the Anti-Money Laundering and Countering Financing of Terrorism Bill be now read a second time. I firstly offer thanks to the Foreign Affairs, Defence and Trade Committee for its dedication to returning this bill to the House within 3 months, and in particular to the chairperson, John Hayes, for his hard work in considering the bill. The committee’s report includes a number of sensible recommendations that will make the regime work better in practice and reduce business compliance costs. There is a high degree of cross-party support for this bill, as I understand it, acknowledging that New Zealand’s current shortcomings have the potential to put at risk our international reputation as a transparent and stable place to do business.
The Anti-Money Laundering and Countering Financing of Terrorism Bill represents the first phase of reform that will eventually see the replacement of the Financial Transactions Reporting Act. We are seeking to meet international standards for managing money-laundering and terrorist financing risks, particularly the recommendations of the Financial Action Task Force. This bill places new obligations and strengthens existing obligations on financial institutions and casinos, collectively referred to hereinafter as reporting entities. The bill establishes the Reserve Bank of New Zealand, the Securities Commission, and the Department of Internal Affairs as supervisors that will monitor the compliance of reporting entities. These supervisors already have oversight roles in respect of reporting entities, and these existing relationships should enable efficiencies in regulation.
The bill as reported back brings our regime closer to that of Australia, and is more responsive to some of the operational difficulties that come with applying the task force’s obligations. I will briefly outline these changes. The purpose clause now explicitly describes the Government’s intention that the private and public sectors cooperate in the implementation and operation of the bill’s regime. For the bill to succeed in its crime detection goals, we need the assistance of financial sectors and casinos to improve and fine-tune their systems for the detection and prevention of money-laundering and terrorist financing. The bill now provides for some necessary institutional arrangements to come into force on enactment, such as regulation and code of practice - making powers. The more robust border cash reporting system, overseen by the New Zealand Customs Service, will come into force 1 year after the bill receives Royal assent. Part 2, which contains the obligations for reporting entities, will come into force on a date to be set by Order in Council, recognising that there are start-up costs for industry that require a decent lead-in time. That is very sensible. The time frames for implementation will in part be determined by progress on the regulations and codes of practice, which will be developed in consultation with industry.
It is the intention of the Government that the bill, as far as possible, enables reporting entities to focus their resources on those customers or products that represent the most risk. In this regard, the committee has made some improvements to the risk management framework in the bill, and those improvements are welcomed. For example, the threshold at which a reporting entity should seek to verify its identity information for existing customers has been raised so that reporting entities will not need to disturb their low-risk customers. Instead, reporting entities will be required to conduct due diligence on existing customers only where, according to an assessment of risk, there is material change in the business relationship and there is insufficient information about a customer. The bill does not set strict limits on time frames for verifying a customer’s identity in situations where money-laundering risks can be managed. The committee has also recommended that reporting entities not be required to conduct enhanced scrutiny of domestic politically exposed persons. As enhanced scrutiny of domestic politically exposed persons is not a strict requirement of the Financial Action Task Force, I intend to consider this matter outside this particular legislation in the context of the United Nations Convention Against Corruption, and more work will be done on that issue.
The most substantive recommendation in Part 3 of the bill is an amendment to remove explicit personal senior management liability, while the entities remain liable. The committee also recommended that reporting entities be protected from civil or criminal action where they are acting to comply with the legislation. For example, where a reporting entity ends business relationships with customers who will not verify their identity, they will be protected from civil action. Part 4 sets out the institutional arrangements necessary to ensure that the new framework will operate smoothly. The committee recommended the inclusion of outsourcing provisions in this part to allow supervising agencies to contract expertise where needed. Again, this is a sensible proposal.
As a Government we want to ensure that our financial sectors are robust, are attractive to legitimate international investors, and are not seen as a safe haven for organised criminals. This bill helps to achieve those ends. I am grateful for the hard work undertaken by the Foreign Affairs, Defence and Trade Committee in that regard, for the helpful suggestions made, and for the broad cross-party support for this legislation. I commend this bill to the House.
