Government plans to introduce anti-money laundering legislation to combat terrorist financing have been put back six months while ministers consider a framework for costs.
The legislation was supposed to have gone to parliament this month but will now not be tabled until April, the same month the OECD's Financial Action Task Force (FATF) arrives to check compliance with the international standards New Zealand signed up to as a member country.
The delay means by the time New Zealand puts the legislation through parliament probably not until next October it will be among the stragglers of the 132 developed countries pledging compliance. More than half have already met their obligations, including Australia, the United States and the United Kingdom.
When former Justice Minister Phil Goff announced in February 2005 the new laws would be introduced to combat money laundering and terrorist financing, he said there was no specific evidence New Zealand was being exploited by international crime or terrorist groups.
But New Zealand's largely deregulated financial system ``results in potential loopholes ... that require closing in order to meet strict international requirements''.
He said a comprehensive monitoring framework would be put in place to ensure all financial institutions met standards for countering laundering.
People providing money transfer or currency change services would be subject to a registration regime. Detailed obligations would be set out in an enforceable code of practice.
Associate Minister of Justice Clayton Cosgrove said this week he made no apologies for the delays, which he said had been made in full consultation with FATF.
He said huge costs surrounding compliance had been foreshadowed for some years for transactions by individuals.
He decided in May that a framework could not be put together without some cost modelling. Accounting firm Deloitte had been contracted to do the model and its findings were expected in the next week or so.
The introduction of legislation will apply first to banks and institutions, then later to businesses.
Cosgrove said there were early indications compliance wouldn't be anywhere near as costly as originally envisaged for banks and institutions. Figures in the hundreds of millions have been touted but he believed the annual figure would be about $104m across the banking and financial institution sector.
In doing the cost analysis there had been competitive pressures because banks did not want to reveal the minutiae of their procedures.
Cosgrove said this was exacerbated by the difficulty of costing something when institutions did not know what the framework was.
``We have to do it to meet our international obligations but I didn't want to come out and say, right boys, this is what we are doing and to hell with the cost,'' he said.
``If the government had produced a draft framework without context business would have said, `you are not taking any notice of us'.''
Cosgrove said the new legislation was not the only thing in the pot to combat terrorism.
Financial institutions will be required under the new regime to comply with amendments to the Financial Transaction Reporting Act (1996) requiring verification and retaining information about the identity of the originator or wire transfers. Other legislation includes the Terrorism Suppression Amendment Bill.
Source: Business Day
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