Keep our Money Clean There is a struggle going on behind the multiple facades of finance and commerce in New Zealand.
It has to do with fighting crime, facing responsibilities and keeping the country honest. Specifically, the faceless villains are launderers of money and financiers of terrorism; the respondents are the squeaky-clean handlers of money in the New Zealand economy, whose new responsibilities have many of them in denial. It’s not something they have ever had to think about. Their understanding extends to visions of shady characters heaving suitcases stuffed with cash across a counter to buy a property, then, after a little while, the buyers sell, throw away both their suitcases and the opprobrium, and enjoy the legitimate outcome of a property sale. However, the criminal class has risen rapidly in expertise, creativity and volume.
According to the Department of Justice, about $1.35 billion, from fraud, illegal drugs, tax evasion and other crimes, is laundered per year through ordinary New Zealand businesses. Catching these crimes as they happen is no simple matter, and of course systemic complexity breeds expense. Nevertheless, this level of vigilance is what is expected of just about every firm in the country through which lumps of money occasionally come and go in the normal course of business.
An insistent government, with a firm grasp on the shirt-fronts of business operators, is bent on shaking them from their apathy. It is armed with the Anti-Money Laundering and Countering Financing of Terrorism Act 2009, and its amendments of 2017.
Those who engage daily with the sentiment within various business groups say that apathy lives on — “She’ll be right. It surely can’t apply to me” — and compliance with the demands of the new law is far from brisk.
Adding to business apathy is the cavalier doubt that the Department of Internal Affairs, which is the supervising agency responsible for ensuring that businesses are complying, will be capable of staging a biennial audit of the scale necessary to uncover non-compliant miscreants amid the spate of new businesses encompassed by the law.
The risk of neglecting compliance is substantial. In a global environment where enormous amounts of cash can change hands at the click of a mouse, nothing short of New Zealand’s reputation as “a good place to do business” hangs in the balance. Since more than a billion dollars is involved per year, penalties for serious breaches of the law are also substantial. Repeated failure to comply with obligations under the provisions of the Act, providing false or misleading information and other criminal offences may result in fines up to $5 million for businesses, while individuals may be fined up to $300,000 or sentenced to up to 2 years in prison. Thus, apathy can be a life-changing matter.
Just five years ago, New Zealand’s Anti-money-laundering legislation covered only banks, casinos and financial services providers and some trust and company service providers. The more recent Amendment Act has launched a “Phase 2”, which has already roped-in lawyers, conveyancers, more trust and company service providers, accountants and accountancy service providers. From January to August next year, real estate agents, dealers in high value goods and the Racing Board’s management of betting on sports and racing will follow. They are charged with properly detecting, identifying, investigating and reporting suspicious financial activity, and they must have the analytical rigor in place to achieve it.
These categories cover the heartland of New Zealand’s financial sector and peripheral territory, most of it made up of small- and medium-sized businesses of little more than marginal performance for whom an apathetic failure to comply could mean bankruptcy. Many regard compliance with the Act as too hard, because anti-money laundering preparedness is too difficult a landscape to navigate and there is a shortage of expertise. A great many organisations are sticking their heads in the sand or managing manual processes that are incapable of capturing risks as they occur.
To achieve the required level of acuity, New Zealand businesses are expected to foot a substantial bill: The Justice Department estimatesthat over a period of 10 years, compliance with the Act will cost them between $800 million and $1.1 billion. First, a company will need to conduct an internal risk assessment, involving either its own staff or outside consultants. Having assessed the risk, the company will then need to establish policies, procedures and processes to ensure that the risk is managed. Then, it will have to appoint a compliance officer to administer this management.
Exposure to risk of non-compliance is heightened in the case of company directors. Each and every director has a duty to ensure the exercise of due diligence in a company’s business dealings and to ensure that companies comply with anti-money laundering laws. Yet directors currently have little or no real-time visibility of their personal risk, or that of the organizations for which they are accountable. In many cases, directors sit on more than one board, greatly increasing their personal liability for compliance.
Watching from the wings is an Auckland startup, Dimension GRC (Governance Risk &Compliance), offering software as a service to firms caught up in the need to comply with the Act. The scope and capacity of the cloud-based Dimension GRC software is far reaching. It is designed to be cost effective for small- and medium-sized businesses, but swings the power of global analytics behind the local compliance process. It automates the process, thereby reducing the cost because the need for human capital is heavily reduced. Moreover, the software development company is wholly New Zealand owned and research and development stays at home.
Finding and reporting suspicious anomalies within the cash flows of a business in real time requires a staggering bank of data. Dimension GRC gives an organization a holistic, real-time view across its entire operations. Due diligence — or the care that should be taken by a reasonable person before entering into agreements or transactions — is its forte, casting a swathe of scrutiny across all transactions, business risks and customer and business-partner profiles. The service calls on global data providers for customer due diligence, a resource which has hitherto been available only to the big banks.
Dimension GRC’s solution provides simple and elegant tools to gather meaningful insights and implement effective compliance systems to manage and resolve risk and fraud. Basically, it allows organizations to focus on their core business and make more informed decisions. When a company’s compliance officer boots up his or her PC in the morning, Dimension GRC has already done the heavy lifting with real time insights and analytics provided to ensure the company only focuses on what requires attention. If a potential risk is identified, the organisation needs to investigate it. If the company believes the transaction to be money-laundering activity, the case is referred to the Police Financial Intelligence Unit.
As well as providing its software as a service, Dimension GRC will undertake the training of client staff to give them the skills to establish compliance procedures, processes and policies.
What makes Dimension GRC stand out is its elegant and affordable solution providing insights at a glance. With you in mind, Dimension GRC manages both customer due diligence and ongoing due diligence with insights to guide your attention to incomplete customer profiles and expired Identification, required Enhanced Due Diligence & transactions breaching your risk tolerance.
For small- and medium-sized enterprises, the alternative to Dimension GRC may be a manual or Excel spreadsheet approach to compliance, but this is hard work, involves a lot of cost and allows for too much subjectivity. Essentially, it gives the criminals all the advantages, and this is something the Anti-Money Laundering and Countering Financing of Terrorism Act is striving to avoid. The Justice Department believes the present campaign may end up preventing up to $5 billion in broader criminal activity, mainly by thwarting reinvestment in new ventures. It also foresees an $800-million reduction in social harm related to the illegal drug trade.
Criminal organisations and people who finance terrorism target businesses and countries they believe have weak systems and controls that they can exploit. AML regulation is not going away; to protect our communities, our economy and our reputation, we all need to “do our bit” for the greater good.
Over the coming weeks, Dimension GRC will provide further insight into AML regulation, what is required, tips on implementation and how you can manage the change with ease.