Enforcement

Enforcement

An estimated $1.35 billion is generated annually in New Zealand for money laundering. This includes drug offending ($750 million), fraud ($500 million) and other offences such as burglary ($100 million) that cause harm to our communities and damage our reputation.

This figure excludes domestic tax offending. It also excludes the laundering of overseas proceeds of crime through the New Zealand financial system, or by misusing its legal persons and arrangements (such as trusts). The total value of money laundered through New Zealand businesses each year is likely to be significantly higher than $1.35 billion.

As an AML/CFT supervisor, part of our role is to ensure that the reporting entities we supervise comply with the AML/CFT Act. This is so that money laundering and terrorism financing are detected and deterred in New Zealand. This ensures trust and confidence in the integrity of the New Zealand financial system and maintains our reputation internationally.

When failures by a reporting entity to meet its AML/CFT obligations are repeated, serious, systemic or wilful, we may use one of our available enforcement tools.

Enforcement toolkit

Formal warning

This warns that sanctions may be imposed if areas of AML/CFT non-compliance are not addressed. Depending on the seriousness of the non-compliance, we may publish the formal warning to deter others.

Enforceable undertaking

We may accept a legally binding written undertaking detailing what a reporting entity must do to comply with its AML/ CFT obligations. This may be followed by enforcement action if the written undertaking is breached.

Injuctions

We may apply to the High Court to restrain a person from engaging in conduct that is, or would be, a civil liability act under the Act.

We could seek an injunction restraining a person from acting as an AML/CFT compliance officer or being a member of key management personnel of any organisation deemed a reporting entity under the Act. We might also ask the court to restrain someone from doing something that contravenes the Act.

Civil proceedings

Taken through the High Court, this enforcement action may seek penalties and/or injunctions (as explained above). Fines of up to $200,000 per civil liability act in the case of an individual, or $2 million in the case of a body corporate, may be imposed.

Criminal proceedings

This seeks criminal prosecution and penalty through the courts for non-compliance with the AML/CFT Act. The maximum penalty is a term of imprisonment of up to two years and/or a fine of up to $300,000 in the case of an individual, or $5 million in the case of a body corporate.

In the last reporting year, the Department had 1 enforceable undertaking, 2 civil proceedings and 1 criminal proceeding.
Enforcement Enforcement undertaken 12 months ending 30 June 2020
Enforceable undertaking 1
Civil proceedings (including injunctions against four individuals) 2
Criminal proceedings 1
A lady is showing a man some paperwork A lady is showing a man some paperwork

Civil Proceedings

OTT Trading Group Limited and MSI Group Limited

In July 2020, the Auckland High Court issued a judgment in the civil proceedings by the Department against Auckland-based money remitter OTT Trading Group Limited (OTT), and Christchurch-based money remitter, MSI Group Limited (MSI). This was the fourth civil proceeding by the Department for pecuniary penalties.

These proceedings under the AML/CFT Act resulted in fines of $3.1 million awarded against OTT, and $4.485 million awarded against MSI. A restraining injunction was also granted against OTT.

This judgment followed restraining injunctions in May 2020 against three individuals associated with OTT and MSI. One employee was restrained from acting as a compliance officer for any reporting entity. Also, the respective directors of OTT and MSI were restrained from acting as senior managers of any reporting entity or engaging in any business activity that would make them a reporting entity under the AML/CFT Act.

The penalties related to breaches of the AML/CFT Act between May 2014 and April 2019 and reflect aggravating conduct. This included failing to cooperate with the Department in its investigation and attempts to mislead the Department, including trying to disguise the status of MSI as a reporting entity.

This judgment shows the importance of monitoring customer transactions and undertaking enhanced customer due diligence where necessary. It also highlights that working with the Department as the supervisor is essential for both reporting entities and the AML/CFT system.

Jin Yuan Finance Ltd

In October 2019, the High Court issued a penalty on Jin Yuan Finance Ltd (Jin Yuan), an Auckland-based money remitter. Jin Yuan was fined $4 million plus costs for repeated non-compliance under the AML/CFT Act.

Jin Yuan was monitored closely by the Department as it had a history of non-compliance since 2014, and was issued a formal warning for compliance failures in 2015. Jin Yuan had repeatedly breached requirements to conduct customer due diligence, adequately monitor accounts and transactions, and keep records. It had also failed to establish, implement and maintain an AML/CFT programme, and ensure that its branches and subsidiaries complied with the AML/CFT Act.

Despite numerous engagements with the Department, Jin Yuan repeatedly failed to meet its obligations under the Act and didn’t action remediation plans put in place to help meet compliance requirements.

Criminal Proceedings

Jiaxin Finance Limited

In March 2020, Jiaxin Finance Limited, its owner Qiang Fu, and his mother Fuqin Che, were convicted of offences under the AML/CFT Act. Jiaxin Finance was sentenced to pay a fine of $2.55 million, Mr Fu was sentenced to pay $180,000, and Ms Che was sentenced to pay $202,000.

Between April 2015 and May 2016, Jiaxin Finance and its brokers were responsible for remitting over $53 million into New Zealand for an international customer.

Jiaxin Finance failed to conduct customer due diligence and failed to report and keep records of suspicious transactions relating to this customer. Ms Che also separately structured transactions to try to avoid the application of AML/CFT requirements for this customer. She did this by making 14 separate cash deposits totalling $710,772 into his New Zealand bank account. These payments were spread over a period of four days and made at different branches of the bank.

This was the first criminal action taken by an AML/CFT supervisor under the Act.