Anti-money laundering risk assessment requirements

NEWS RELEASE

Date 29 March 2011

Sector Risk Assessment released ahead of anti-money laundering requirements

The Reserve Bank today released its Sector Risk Assessment to help registered banks, non-bank deposit taking institutions and life insurers prepare to meet upcoming requirements under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009.

The Reserve Bank will be responsible for supervising the compliance of these organisations with this new legislation, which is expected to fully come into force in 2013.

An assessment focused on the risk of money laundering that these types of institutions may face has been carried out by the Reserve Bank. There is currently insufficient information about terrorism financing to widen this focus.

This assessment is intended to provide guidance to the institutions the Reserve Bank will supervise as to the money laundering risk in their sector. This in turn will help firms in undertaking their own risk assessments.

The ratings provided by the Reserve Bank in the assessment do not reflect on the financial stability of these sectors or the institutions within them, but merely provide an overview of the relative risk of money laundering.

Measures to counteract money laundering are already in place in banks and some of the other organisations the Reserve Bank will supervise. However, these controls have not been considered for the purpose of the assessment, but will be once the Act comes fully into force.

The Reserve Bank’s assessment rates the banking sector as having a relatively high potential money laundering risk. This may mean that money launderers will target the sector for these purposes.

This rating is in line with similar assessments for banks globally and is largely due to factors such as the wide accessibility and availability of banks, the cash intensive nature of their products and services and the volume of transactions they process.

Overall, the non-bank deposit taking sector is described as having a “medium” potential risk rating. This is because their products and services are not generally as cash intensive, but they process a high volume of transactions both in terms of value and volume.

However, within this sector credit unions are rated as “low” potential due to their strong domestic customer focus.

The assessment puts life insurers at a “medium/low” potential risk Factors such as the large single payments and payouts involved can be attractive to money launderers. However, a large proportion of the transactions in this area are domestic and the sector is not cash-intensive.

The Reserve Bank Sector Risk Assessment can be found on the Bank’s website at http://www.rbnz.govt.nz/aml/4345201.pdf. The Securities Commission and the Department of Internal Affairs are also releasing assessments relevant for the organisations they will supervise. These can be found on their respective websites.

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