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The Fiducia team's latest views on AML/CFT in New Zealand

Money Laundering Risks, Money Remitters/ 2017-06-21T11:28:12+00:00 June 23rd, 2016|

The Toxic De-Risking Whirlpool

The beginning of June 2016 saw the High Court of New Zealand allow Kiwibank to close the bank account of E-Trans International, a New Zealand money remitter. This is an important decision because it is the first time we’ve heard the New Zealand courts discuss in detail the legality of the “de-risking” activity of New Zealand banks.

The High Court found this time that the closing of E-Trans account was legally sound and that banks could use their own discretion as to who they undertake business with and why. This might be so, but it doesn’t make the problem go away.

The problem is that refusing a customer a bank account who cannot access a bank account anywhere else simply means the customer is more likely to access that service through underground means. We are seeing an entire industry being refused bank accounts to service their legitimate money remittance business, so they are turning to illegitimate means to continue their business operation. The risks are not being managed by the de-risking, they are being magnified by being made more opaque.

There is no bad guy here; the banks are struggling to manage the huge regulatory risk they are exposed to under the Anti Money Laundering and Counter Financing of Terrorism Act. The money remitters are, for the most part, doing what they can to continue offering services to their clients and communities. The regulators have stated that banks have no reason to fear providing bank account services to money remitters. We’re stuck in a toxic whirlpool.

Fiducia is close to launching a market-first product to help the banking and money remittance industry step out of this whirlpool. Want to be the first to find out what it is?

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