Key Takeaways:
> Fraud has emerged as the highest money laundering threat in New Zealand, with technology exposing citizens to higher volumes of scams.
> Both the New Zealand and the U.S. reports highlight the growing abuse of virtual assets and decentralized finance (DeFi) systems by criminals.
> Banking sectors remain highly vulnerable to money laundering in both countries, with cross-border transactions posing significant risks.
> North Korea (DPRK) is identified as a major threat actor in both assessments, known for sophisticated cyber-enabled frauds.
New Zealand Police have published their 2024 National Risk Assessment (NRA) on anti-money laundering (AML) and countering the financing of terrorism (CFT), revealing an alarming rise in fraud-related crimes and continued challenges from drug trafficking and transnational money laundering.
The comprehensive report, the first since 2019, provides crucial insights into how criminals are exploiting vulnerabilities within New Zealand’s financial system and highlights the sectors most at risk.
Fraud Takes Center Stage in New Zealand
The assessment identifies fraud-related crime as a top threat, with technology dramatically increasing New Zealanders’ exposure to scams. According to the report, both the initial fraud and subsequent laundering often occur within the financial system itself, making detection particularly challenging.
According to the report, there’s an elevated risk of fraud when compared to the 2019 NRA report, due to technology exposing New Zealanders to higher volumes of scams and frauds. Drug-related offenses and transnational money laundering round out the top three threats identified in the New Zealand assessment.
Banking Sector Remains Vulnerable
The banking sector continues to be highly vulnerable to money laundering activities in New Zealand, alongside any sectors that facilitate the movement of proceeds into or out of the country.
The report specifically highlights several high-risk sectors:
- Banking;
- Money or Value Transfer Service (MVTS) sectors offering remittance service; and
- Virtual Assets Service Providers (VASPs).
Other sectors identified as being abused for high-risk crimes include real estate, high-value dealers, casinos, law firms, and accounting practices.
U.S. Faces Similar Challenges
In February 2024, the U.S. Department of the Treasury issued its own National Money Laundering Risk Assessment (NMLRA), which contains many similarities to New Zealand’s findings. The top money laundering threats identified in the NMLRA are fraud; drug trafficking; cybercrime; corruption; human trafficking; human smuggling; and professional money laundering. Increased risk was detected and specifically highlighted for check fraud, unlawful campaign finance, tax crimes, and Russian money laundering.
The U.S. report, like that of New Zealand, emphasizes how criminals are adapting both old and new schemes to maximize profits, employing novel means to carry out fraud schemes on a larger scale, including using telemedicine platforms, call centers, and virtual currency investment scams.
Shared Concerns About Virtual Assets and North Korea
Both reports highlight concerns about virtual assets and decentralized finance (DeFi) systems being exploited by criminals. In the U.S., virtual asset investment schemes (VAIS) accounted for nearly 75 percent of all internet-enabled investment fraud in 2022.
The U.S. report specifically mentions that illicit actors, including ransomware cybercriminals, thieves, scammers, and the Democratic People’s Republic of Korea (DPRK) cyber actors, are now using DeFi services to transfer and launder their illicit proceeds.
New Zealand’s report notes that proliferation financing risk – the raising and moving of funds to finance the development of weapons of mass destruction – largely emanates the DPRK and Iran. Criminals from these countries are known to conduct a range of crimes, including complex cyber-enabled frauds.
Future Outlook
Looking ahead, New Zealand authorities expect demand for illicit drugs to remain high, with technology advancements like generative artificial intelligence (AI) likely to be exploited by criminal entities.
“The increased prevalence of fraud will see more reporting entities and customers becoming victims. NZ is likely to remain a marketplace of choice for foreign transnational serious organized crime groups to launder funds,” warned New Zealand Police.
The U.S. took action through the establishment of a beneficial ownership information registry housed at Treasury’s Financial Crimes Enforcement Network (FinCEN), which launched on January 1, 2024. The registry enhances corporate transparency and addresses a significant gap in the U.S. anti-money laundering regime. The Department of the Treasury and its interagency partners continue to ensure that the U.S. AML/CFT efforts stays ahead of criminals and their existing and emerging techniques. Both reports underscore the evolving nature of financial crimes and the need for continued vigilance and adaptation of regulatory frameworks to combat these threats effectively.