The importance of culture with AML/CFT Phase 2

Nicholas Gilmour
Financial crime consultant

Nicholas Gilmour

Financial crime consultant

Guest author

Nicholas was involved in the development of the ‘Phase 2’ legislation as a member of the New Zealand Police Financial Intelligence Unit.

New Zealand is adopting new money laundering and terrorist financing preventative measures. The Phase 2 implementation programme – which extends existing Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) legislation – introduces new reporting entities into a compliance regime.

AML provisions now include lawyers, conveyances, businesses that provide trust and company services, accountants, real estate agents, businesses trading in high value goods, and sports including racing betting. The new reporting entities join banks, casinos, various financial service providers, and some trust and company service providers covered by the Phase 1 AML legislation.

These additional sectors are considered to play an active role in facilitating money laundering and terrorist financing – hence the sensible placement of new AML and CFT compliance requirements upon them.

The level of adherence and scope of applicability will vary from organization to organization. The variations in role, location, understanding and acceptance of the new compliance obligations will undoubtedly test the overall adoption of wide ranging AML/CFT regulations.

Many professionals in New Zealand remain bemused by the need for AML/CFT practices across their particular sector, making employee adherence especially important. Reporting entities – those participating in one or more activities described in the Act – are also challenged by the new obligations. Consequently, the ongoing success for an AML/CFT culture within New Zealand depends on the ability to manage any naivety and hesitation which undermine the intentions of the Act.

Should employees choose to ignore or neglect aspects of an AML/CFT compliance program or lack training in its importance, their commitment to enforce requirements will likely diminish. Not only will this undermine a reporting entities AML/CFT compliance, it will weaken the overall vision and strategy of the entity.

Reporting entities being brought under the Phase 2 legislation will be expected to assume responsibility and make common sense, calculated decisions when performing their duties. However, the culture within any organisation is critical to its overall AML/CFT compliance requirements. Senior management will be expected to play an active role in developing an applicable AML/CFT culture, as failures can have real consequences – none greater than when exposed by a regulator. 

Adoption of an AML/CFT culture needs to be beyond check-box exercises to have a meaningful and effective impact. Building an AML/CFT culture is going to be hard for many organisations. Even as the process of implementation unfolds, and audits are undertaken, regulators will seek to determine whether senior managers, the board of directors, and employees behave with integrity, understand their business areas, relevant risks and comply with the law.

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