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  • Writer's pictureDilawar Arbab

AML non-compliance is non-acceptable

On the 3rd of March, the DIA released a statement that the owners of Jiaxin Finance Ltd, Qiang Fu and Fuqin Che had been convicted of offences under the New Zealand anti-money laundering Act. It is reported that the owners moved $53 million overseas yet had failed to report and keep records. They had also attempted to subvert the legislation by structuring transactions to try to avoid the application of AML/CFT requirements for a customer. It is noted that in the Auckland High Court, Jiaxin Finance has been sentenced to pay a fine of $2.55m, Mr Fu has been sentenced to pay a fine of $180,000, and Ms Che has been sentenced to pay a fine of $202,000.

This court case is notable because it is the first time criminal action has been taken under the Act. According to the legislation, there are penalties if you seriously breach the law. For breaches of civil offences, individuals can be fined up to $200,000 and companies can be fined up to $2 million. Repeated failure to comply with AML/CFT obligations, providing false or misleading information and other criminal offences can result in fines up to $5 million for businesses, while individuals can be fined up to $300,000 or sentenced to up to 2 years in prison. According to the Sub-part 2 of the AML Act (2009) a civil liability act occurs when a reporting entity fails to comply with any of the AML/CFT requirements, such as failing to perform due diligence. It becomes a criminal offence when in failing to comply, the reporting entity engages in conduct that is reckless or knowingly frivolous of AML requirements.

In being non-compliant as a reporting entity, a company may have not conducted any of the following obligations.

  1. Authored a risk assessment and programme.

  2. Appointed a compliance officer to administer and maintain the programme.

  3. Performed Customer Due Diligence including customer identification and verification of identity.

  4. Performed suspicious activity reporting

Additionally, there are requirements that must be carried out during the year:

  1. All reporting entities are required to prepare an annual report on their risk assessment and AML/CFT programme. This is usually required by the 31st of August.

  2. Each reporting entity must ensure its risk assessment and AML/CFT programme are audited every 2 years or at any other times required by the DIA or FMA.

The AML program must include policies, procedures, and controls for ensuring adherence to the program and ensuring it’s up to date. Consequently, it should outline procedures for vetting of staff, ensuring they are adequately trained, ensuring adequate record keeping and managing and mitigating the risks identified in the risk assessment.

Phase 2 of enacting New Zealand’s AML/CFT laws was completed in 2018. Issues around AML/CFT have gained much publicity and the DIA have done a tremendous job of educating the business community. It is clear that companies cannot plead ignorance any longer and the recent ruling against Jiaxin Finance Ltd is evidence that non-compliance will not be tolerated any longer.

ABAML provides comprehensive AML and KYC risk assessment, audit and training for small to medium businesses.

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