For the uninitiated, money laundering is the process of making the proceeds of criminal activity appear to have been legally obtained. Simply put – it takes money that was made illegally and makes it appear legal.
It is important to acquaint a business with the implications of money laundering as this financial crime negatively impacts society, as well as legitimate business interests by allowing harmful criminal activity to thrive.
To combat money laundering, anti-money laundering (“AML”) controls aim to stop financial criminals from disguising these illegally obtained funds as legitimate ones.
In a similar vein, most conversations about AML also include mentions of the countering of financing terrorism (or “CFT”). As the name indicates, CFT tools work to combat terrorist organisations from acquiring financing to carry out their aims. While financing for these aims could come from legitimate sources, they may also be acquired through illegal activities such as trafficking in weapons.
When implemented properly, both AML and CFT tools can support broad and effective deterrence efforts against a wide range of criminal activities, including the financing of terrorism.
AML and CFT concepts are riddled with jargon, and comprehending the numerous acronyms might be a hard task. One AML is committed to making your AML CFT Compliance worries go away. Allow us to help you – In the following paragraphs, we have collated a handy list of some of the most commonly used acronyms in the field. Dive in and refresh your memory in no time at all!
Some key acronyms to acquaint yourself with are:
ML – Money Laundering A financial crime involves disguising financial assets so they can be used without detection of the illegal activity that produced them.
AML – Anti-Money Laundering As mentioned above, Anti-Money Laundering broadly refers to the tools, laws, regulations and procedures intended to prevent criminals from carrying out money laundering.
CFT – Countering the Financing of Terrorism Broadly, CFT tools are the practices that prevent, detect and punish illegal funds entering the financial system and subsequently funding terrorist activities. This term is interchangeably used with CTF which stands for Combating or Countering Terrorist Financing
RBNZ – Reserve Bank of New Zealand The RBNZ is New Zealand’s central bank. This means that it works to maintain the stability of New Zealand’s monetary and financial system. It provides regulatory oversight for banks and other financial institutions.
DIA – Department of Internal Affairs The DIA is the public service government department of New Zealand that is charged with taking care of AML, and other aspects such as passports, and citizenship.
FI – Financial Institutions An FI is a company that is engaged in the business of dealing with financial and monetary transactions such as deposits, loans, investments, and currency exchange.
FIU – Financial Intelligence Unit The FIU is an arm of NZ’s Financial Crime Group framework and is mandated to assist with the detection and investigation of money laundering, terrorism financing and other offences.
FMA – Financial Markets Authority The FMA is New Zealand’s government agency responsible for financial regulation.
FATF – The Financial Action Task Force The FATF is an independent inter-governmental body that develops policies to protect the global financial system against money laundering, terrorist financing and the financing proliferation of weapons of mass destruction. The Recommendations formulated by the FATF are recognised globally as the AML and CFT standard.
KYC – Know Your Customer A set list of procedures to verify a customer’s identity, and their financial dealings to effectively manage risk. A cornerstone of AML.
CDD – Customer Due Diligence Customer Due Diligence is the process of performing due diligence on a customer to confirm they are who they say they are, and that they aren’t acting on behalf of somebody else. Although similar to KYC, the difference between the two is this: KYC is about performing customer due diligence CDD. Simply put – CDD is a fundamental step in the KYC process.
EDD – Enhanced Due Diligence New Zealand legislation outlines situations when ‘Enhanced’ customer due diligence is required. These are situations with a higher likelihood (internationally) of money laundering and terrorist financing occurring. Head over to our Enhanced Customer Due Diligence Guidelines for more information.
PEP – Politically Exposed Person A PEP is someone who, through their prominent position or influence, is more susceptible to being involved in bribery or corruption.
PTRs – Prescribed Transactions Reports Prescribed Transactions Reports are documents that build a picture of the entire financial system in New Zealand. These reports provide necessary statistics on the flow of cash and money in and out of New Zealand through transactions called IFTs and LCTs.
IFT – International Funds Transfer An IFT is an international wire transfer of NZD1,000 or more where one institution involved in the transaction is in New Zealand and at least one other is outside New Zealand.
LCT – Large Cash Transaction A domestic, physical cash transaction of NZD10,000 or more involving physical currency.
RNP – Remittance Network Provider Remittance Network Providers are individuals, businesses or organisations that accept instructions from customers to transfer money or property to a recipient. Simply put, they are money transfer businesses.
SAR – Suspicious Activity Report An SAR is a document that financial institutions, and those associated with their business, must file with the FIU whenever there is a suspected case of money laundering or fraud.
TBML – Trade-Based Money Laundering TBML is a type of global money laundering strategy. In it, criminals take advantage of the complexity of trade systems to transfer money between parties and evade authorities. We have covered some material on Trade-Based Money Laundering in our Resource Section, head on over to read more.
With the frequent changes to the legislation, keeping up to date with the newest additions and regulations is crucial for you as a responsible business and to avoid penalties for non-compliance.
Now, we understand that learning about the AML and CFT landscape by yourself while making a compliance checklist for your organization can feel overwhelming. Allow us to help! One AML is a team of specialised analysts here to guide you through the provisions. Book a free 15-minute audit today!
Disclaimer: This information is only to serve as a guide for those living and doing business in New Zealand, and is not a substitute for the provisions or information in the “Anti-Money Laundering and Countering Financing of Terrorism Act 2009” (AML CFT Act) or any of its allied statutes and provisions. The above information is not a substitute for independent, professional legal advice, and is meant for general information only.