The High Court has released New Zealand’s first decision involving the new pecuniary penalties regime under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (Act).
In Department of Internal Affairs v Ping An Finance (Group) New Zealand & Anor  NZHC 2363, the Department of Internal Affairs (DIA) alleged breaches of the Act’s requirements regarding customer due diligence, account and transaction monitoring, record-keeping, and reporting of suspicious transactions.
Ping An Finance (Group) (PAFG) and its sole director had been in the business of foreign currency services and funds remittance. The DIA alleged that PAFG and its director, in relation to over 1,500 transactions which involved a cumulative total of over $100 million, had unequivocally failed to comply with the Act. If proved, such charges allow courts to issue injunctions, and trigger various options as to financial penalties.
The High Court found, on the balance of probabilities, that there had been serious and wide-ranging breaches of the Act. Notably, PAFG had failed to keep appropriate records regarding the identity and verification of numerous customers, and for the transactions which the DIA had called into question. It also failed to submit suspicious transaction reports for any of those transactions, despite the fact that the DIA had identified multiple red flags in respect of 173 of them.
On the matter of sentencing, the High Court stated that financial penalties imposed under the Act must:
- be significant enough to deter non-compliance and promote confidence in the wider financial system;
- use the maximum penalties as an indicator of consequences for the most serious infringements, weighing the gravity of breaches against that worst case scenario; and
- give appropriate weight to Parliament’s intention, in legislating to increase significantly the available penalties, that fines should be large enough to enable meaningful punishments to be imposed on large financial institutions.
Applying those principles, the High Court ordered PAFG to pay $5.29 million in total pecuniary penalties, and issued injunctions barring PAFG and its director from any activity as a financial institution(s) (as defined under the Act).