Suspicious Transaction Reports (STRs) are the cornerstone element of the New Zealand AML (anti-money laundering) regime. They have, in fact, almost doubled in the last year. Despite their importance, many reporting entities still do not adequately understand them or how they work. What are STRs, when should they be filed, and why do reporting entities need to file them?
What is an STR?
Every reporting entity in New Zealand is monitoring the transactions of their customers. Organisations are expected to understand the way in which their customers engage with their business, and to be able to identify when a customer might deviate from this ordinary engagement.
If a customer’s transactions are deemed suspicious, an STR must be filed with the New Zealand Police Financial Intelligence Unit (FIU). An STR must include why the transaction was considered suspicious, particulars of the transaction and details about the parties to the transaction.
When is a Transaction Suspicious?
When to file an STR is a tougher question to answer. What makes a transaction ‘suspicious’ is hard to pin down. It depends on the particular circumstances of the transaction, the profile of the particular customer, and what a reasonable person would do in those particular circumstances.
There is no monetary threshold to make a transaction suspicious; detection relies much more on patterns and deviations from those patterns. The FIU have have guidelines on what may make something suspicious. The 2013 Financial Intelligence Unit Suspicious Transaction Guidelines outline a list of general and industry specific indicators. General indicators include links to criminal activity, unusual size or frequency of the transaction.
Why File an STR?
But why bother collecting all this information? STRs are used by the FIU to create a database of suspicious activity. This database then contributes to wider police investigations into criminal, and possibly terrorist, activity both in New Zealand and globally. Having an STR process is an international requirement by the international AML regulatory body, the Financial Action Task Force (FATF), and the United Nations Security Council resolutions.
And more importantly for you as a New Zealand reporting entity, filing STRs is a requirement under sections 40-48 of the AML/CFT Act 2009. Failure to comply with this can lead to fines up to $300,000 or imprisonment for up to two years.
It is important that you know what an STR is, or get to know quickly. Need to know more about STR reporting in your business? Contact Fiducia at email@example.com for a no-obligation consultation.