$1.35b in NZ criminal proceeds generated for money laundering each year

New Zealand is awash with dirty money but how much is anyone's guess.

A new report by the New Zealand Police Financial Intelligence Unit (FIU) estimates domestic criminal activity is generating $1.35 billion for money laundering each year.

Most of it comes from drug offending ($750m), fraud ($500m) and other offences such as burglary ($100m).

But the estimates exclude tax offending or laundering of money from overseas criminal activity. And the actual amount laundered domestically is likely to be much higher once it's been washed through multiple transactions to hide its source and provide legitimacy.

FIU's 2019 risk assessment report has identified several high risk sectors that remain vulnerable to abuse by criminal organisations intent on cleaning illicit wealth through international remittance or investment in local assets like blue chip real estate and luxury products.

"The channels that currently offer opportunities to money launderers in New Zealand are those financial, legal, accounting, real estate, and retail or dealer services that:

• Offer anonymity to the offenders,

• Are available for moving large values and volumes of legitimate funds and which provide a screen for illicit transactions,

• Are widely available internationally and also have poor AML/CFT [Anti-Money-Laundering and Countering Financing of Terrorism] controls internationally, and/or

• Are cash intensive, which are particularly used to disguise drugs proceeds."

International wire transfers are highlighted in the report as being highest risk. However, newly introduced anti-money laundering laws (AML) had "mitigated the systemic vulnerabilities", the report said.

Other areas of concern included cash-intensive sectors such as casinos.

"Cash remains the dominant means of transacting for domestic drug crimes. Dealers in high-value goods remain vulnerable to abuse to place cash proceeds, as does casino gambling.

"Non-financial assets are also abused at all stages of money laundering. In particular, high-value transportable goods can be used to store wealth or to move value between criminals. Similarly real estate assets are vulnerable to abuse in large money laundering transactions."

The report singled out the real estate sector as a specific risk, as it had been overseas.

"It is possible that launderers active in the international market may be similarly attracted to New Zealand. Where cases of misuse of New Zealand real estate by overseas criminals has occurred, these have included offending involving high values of proceeds creating a significant money laundering threat."

The report noted that recent changes to the Overseas Investment Act had slashed the number of residential properties sold to foreign buyers, significantly reducing the risk of transnational laundering through Kiwi real estate.

Real Estate Institute chief Bindi Norwell said real estate agents had this year joined a growing list of industries required to comply with AML legislation.

"Traditionally real estate may have been seen as one of the high-risk areas where criminals could try to launder funds. However, with the new rules and the 'herd immunity approach' to AML across the country it is becoming increasingly difficult for criminals to do so.

"The profession takes its responsibilities extremely seriously and it's essential that real estate agents play their part in protecting the country against money laundering."

The report said that while an estimated $1.35b in criminal proceeds was generated for laundering each year in this country, the actual transactional value was likely to be much higher because launderers had to move funds through multiple transactions to layer, disperse and integrate proceeds of crime.

Since 2011 there had been more than 50,000 reports of suspicious financial activity, and the number of money laundering charges had significantly increased, the report said.

FIU manager Detective Inspector Christiaan Barnard said understanding the risk from money laundering or terrorism financing was essential to understanding where to deploy compliance and investigative resources.

"The risk assessment continues to highlight the areas of remittance and trust or company and service providers (TCSPs) as being high-risk sectors for money laundering. The use of cash also remains central to much of the offending detected as it provides a way of anonymising the paper trail.

"The offences of drug dealing and fraud are the most common offences associated with money laundering and there is an emerging transnational element to these illicit businesses."

New Zealand police worked closely with international partners to stymie criminal attempts to use these networks.

Money remained a key driver of crime, reflected by a police target of seizing $500m in cash and assets from criminals by 2021.(via NZHerald)