Gary was interviewed by Radio NZ’s Morning Report show on 30 May 2018, for his expert comments on claims by a political scientist that AML rules are ineffective.
In summary form, Gary’s views expressed to the business journalist Patrick O’Meara were that:
Some aspects of the “ineffective” claim are doubtful:
- It is too soon to reasonably appraise whether New Zealand’s Anti-Money Laundering laws, which only came into force in mid-2013, are yet “effective” or not.
- The study seems to focus upon only one measure of “effectiveness“, which compares the value of assets seized under the Criminal Proceeds Recovery regime with broad-brush estimates of the annual size of financial crime gains. Estimates of the overall scale of money laundering, or financial crime profits, are notoriously woolly and based on a number of movable assumptions. While the so-called “black economy” or “underground economy” is unquestionably very large, it is an inaccurate guess-timate measure upon which to base a determination that the system is ineffective. Indeed, law enforcement agencies should stop promoting AML using such large vague figures.
- At an anecdotal level, there is no question that banks, financial institutions and (more recently) lawyers are much more vigilant about what money is moving through their business. They are providing more reports, and better focused reports, which the Police Financial Intelligence Unit can sift and filter into usable intelligence and direct to their operational and recovery units.
- There is also a very real benefit, even though difficult to quantify, to NZ’s international trading reputation by not being seen as a soft touch for money laundering and financial crime.
However, hopefully this study begins a process of proper cost-benefit analysis research:
- Little serious work has been done into the cost-benefit equations for highly intrusive and punitive AML/CFT laws. It would be nice to see a really penetrating analysis of how much the AML compliance burden is costing the economy, but that has never been done.
- Compliance costs are generally disproportionate and out of kilter for small-medium sized business, of the kind say of a money remitter, small finance company – or in future sole practitioner lawyers and accounting firms.
- The triple headed supervisory model needs to be revisited, as Gary and other experts submitted to Parliament in the 2016–2017 round of law reforms. While each of the 3 supervisors have good capable staff within them, their institutional focus is each different and some are more effective enforcement bodies than others. One agency would mean less of the wasted time and effort that currently has to go into keeping them consistent and aligned, through the National Coordination Committee and other forums.
- Our AML regime is now moving to capture up to 4 times the number of reporting entities, and the compliance cost will spread into many more businesses. So it is sensible for government to keep reviewing compliance cost-benefit elements, and the most efficient regulatory structure, and irresponsible for the Ministry of Justice to refuse to acknowledge any value in those reviews.
The online summary report is here:
The two radio audio clips are available here: