Financial institutions are facing costs in the “hundreds of millions” to comply with new money laundering legislation, but the effort will have little effect and cost IT organisations dearly, according to Kiwibank CEO Sam Knowles.
The laws, aimed at preventing money-laundering and the financing of terrorism, and other regulations governing big-money transactions have yet to be finalised. It is proposed that the regime apply not just to financial institutions but to other big-money businesses such as real-estate and jewellery sales.
However, speaking at the government’s Managing Identity conference, held in Wellington last month, Knowles said that policing such transactions will cost hundreds of millions of dollars and will have “little result”.
The task of checking the provenance of large transactions is likely to rebound on bank ICT departments as well as on other business units.
The Ministry of Justice has commissioned a report from consultancy Deloitte on the financial impact of complying with the proposed regime, but this will likely lead to just minor tweaks to the regulations, according to the department’s spokesman, Gregor Allen.
The ministry has consulted fully with industry over more than a year so any
amendment to the core legislation is unlikely, he says.
“The banks understand that a lot of this is mandated by international agreement,” says Allen. And for a New Zealand bank to decline to “follow in the slipstream” would be to risk being cast adrift from vital international banking links.
The anti-laundering push is being coordinated by an inter-governmental body called the Financial Action Task Force (FATF).
Most New Zealand based banks are already coming under pressure from their Australian owners to quickly put in place policies that the Australians have implemented since about 2005, says Allen.
Kiwibank is, of course, New Zealand-owned and, coincidentally, is running an advertising campaign depicting the bank as part of a resistance movement against foreign domination.
Deloitte’s report is expected to be completed in a week or two, says Allen.
This will then set in motion the time-frame for policy to be approved by Cabinet around mid-year and legislation to be passed before the end of the year.