Falling foul of anti-money laundering laws results in multi-million dollar fines for Kiwi companies
03 Aug 2020

Abandoned offices generally leave telltale clues about their previous occupants.

But not Unit 2, 110 Mandeville St, in the Christchurch suburb of Riccarton, wedged between counselling rooms and a private education business.

Peering through the locked glass door of the office reveals emptiness framed by a swathe of bare carpet and blank walls.

The office was, until about March, humming with financial transactions. Its business, operated under the name MSI Group, was currency changing and the remittance of money, mainly from New Zealand to China.

Customers attracted by the cheaper commissions and possibly the lack of scrutiny, put at least $213 million through the company’s bank accounts between 2015 and 2019.

An operation in the same group, OTT Trading, was doing the same thing in Auckland, running up $196m of transactions in the same period.

The clients came into the offices with cash or transferred money from their bank accounts.

It became clear this month why the companies had stopped trading when they were fined a combined total of $7,585,000, in court action by the Department of Internal Affairs (DIA).

The DIA doesn’t expect to see the money. The companies don’t appear to have any assets and their bank accounts appear to be empty.

MSI Group was removed from the Companies Register in May 2019 because it had not filed an annual return since 2016. The DIA had to go to court to get it restored so it could be fined.

The Department told the court its main aim was to send a message that non-compliance would essentially bring hell down on the heads of perpetrators.

The penalties were imposed under legislation that is little known.

The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 came into force in 2013. Its purpose was to detect money laundering and terrorism financing and to maintain New Zealand’s reputation as an honest broker.

Money remittance businesses pose a high risk for money laundering as they often use cash and specialise in moving money quickly between countries.

The head of Internal Affairs’ Anti-Money Laundering group Mike Stone says about $1.35 billion from fraud and illegal drugs is laundered through New Zealand businesses each year.

Under the act, businesses like money remitters and currency changers must vet customers before taking their business. The level of scrutiny depends on the nature and circumstances of the customer.

The act imposes a duty on financial institutions to tell the police about suspicious activities and requires strict record keeping. Businesses under the act must have a compliance programme that includes ways the business assesses the risk each customer poses.

High-risk customers – those requesting large and unusual transactions – oblige money remitters to perform “enhanced due diligence” and to obtain verified information about the source of the customer’s funds or wealth.

In imposing the fines on July 10, Justice Graham Lang said MSI Group and OTT had failed every aspect of the legislation, a failure aggravated by the extent and duration of the businesses.

By Martin Van Beynen, Stuff, 2 August 2020

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