On Friday, the High Court released its decision in the first enforcement proceeding under the Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT Act).
Department of Internal Affairs v Ping An Finance (Group) New Zealand Company Ltd  NZHC 2363 relates to a provider of money remittance and foreign exchange services that failed to comply with effectively all of its AML/CFT obligations. As a result, the High Court ordered a pecuniary penalty totalling $5.29 million, as well as ordering that the company and its sole director and shareholder not undertake any financial activities (as defined in the Act) in the future.
The case proceeded by way of formal proof (there was no appearance in Court by, or for, the defendants) and, as noted, addresses a complete failure to comply with the Act. However, because this is the first case under the Act, the Court took the opportunity to provide a comprehensive and detailed judgment, which addresses a number of interpretive issues that arise under the legislation. These include:
- the meaning of the phrase "complex, unusually large transaction or unusual pattern of transactions that have no apparent or visible economic or lawful purpose";
- the distinction between a "business relationship" and a series of "occasional transactions";
- the importance of record keeping (described in the judgment as "a cornerstone provision" of the Act);
- that the test requiring reporting entities to report suspicious transactions is objective (with the Court stating that the FIU suspicious transactions guideline does not accurately reflect the law in this regard); and
- that, although it is not addressed in the Act, the "notional ceiling" for a penalty for an unspecified failure to comply with the Act is $2 million.
Release of the judgment is a significant moment in the context of New Zealand's AML/CFT regime, which has been in force since 2013 (with further "Phase Two" amendments coming into force this year). To date, reporting entities have relied on guidance issued by the AML/CFT Supervisors to interpret the Act's complex provisions. DIA v Ping An Finance will now become the leading source of interpretative guidance on the regime.