The first successful court proceedings have been brought for breach of NZ’s anti-money laundering (“AML”) law. The High Court imposed a pecuniary penalty of $5.29m on the company, Ping An Finance (Group) New Zealand Company Ltd (“Ping An”). Its director was banned from providing financial services. The proceedings were brought by the Department of Internal Affairs, the relevant regulator. The case is particularly relevant to NZ businesses subject to AML obligations, as it confirms the interpretation of some key provisions.
Ping An operated a foreign exchange & money remitter business in Auckland. The Court found that Ping An was “seriously deficient in complying with a multiplicity of obligations under the Act” and that there were “widespread contraventions across several key areas which were not isolated or infrequent”. The contraventions were clear and included failing to carry out customer due diligence, to keep records and to report suspicious transactions.
The case is significant for being the first time successful court proceedings have been brought for contraventions of NZ’s AML law and for the large pecuniary penalty. The penalty reflects the seriousness of the breaches, the actions of the director to mislead the investigators and the need for large penalties to effectively achieve the AML law’s objectives. The judgment also helpfully confirms the interpretation of some key provisions, including:
- The meaning of the phrase “a complex, unusually large transaction”, a trigger for enhanced customer due diligence “(ECDD”) to be performed. The Court found that ECDD is triggered when a transaction that is either “complex” or “unusually large” (not a combination of both).
- Whether the grounds for “reasonable grounds to suspect” a suspicious transaction (which must then be reported to the Police within 3 working days) are based on an “objective” or a “subjective” test. The Court found for “objective”, that is what matters is what a company reasonably ought to have known from available information, not what it actually knew.
- The 3 day suspicious transaction reporting deadline starts when the company has information that constitutes reasonable grounds for suspicion, not when the suspicion is actually formed (which had been the Police interpretation).
- What the maximum pecuniary penalty is for failing to report a suspicious transaction. While maximum pecuniary penalties are specified for most “civil liability acts” they aren’t for a contravention of the obligation to report suspicious transactions. The Court adopted, as a “practical guideline”, a maximum penalty of $2m and imposed an actual penalty of $1.495m.
It would be advisable for businesses subject to AML obligations to review the case and to then consider whether their AML/CFT programme, and related systems and processes, are compliant with those interpretations. Cygnus Law advises on AML obligations and can assist you to review your programme, systems and processes in light of the judgment.
This blog entry is a brief summary and for information only and should not be relied on as legal advice.