Money laundering and Criminal Proceeds (Recovery) Act 2009

Question 1

What is the meaning of money laundering?

Answer 1

Money laundering is the process of dealing with the proceeds of criminal activity in such a way as to make the proceeds appear to have been legitimately acquired.

Illicit proceeds may be laundered to avoid detection of criminal activity, to preserve the fruits of crime, or to further a criminal enterprise. The essence of the activity is concealment

Question 2

What is the Money laundering cycle?

Answer 2

Placement

• Cash enters the financial system
• Example: An offender makes money from selling cannabis and then deposits these proceeds into an associate’s bank account

Layering

• Money is involved in a number of transactions
• Example: The associate transfers the money into an account held by a ‘shell’ company that the offender is the director of.

Integration

• Money is mixed with lawful funds or integrated back into the economy, with the appearance of legitimacy
• Example: The money is declared as revenue for the company, tax is paid, and then the offender pays himself director fees or a salary out if the company account.

Question 3

What is the statute and section relating to money laundering?

Answer 3

Sec 243 Money Laundering, CA 1961

Question 4

What are the elements of money laundering s243(2)?

Answer 4

1. In respect of any property that is the proceeds of an offence
   - Property is defined to include both tangible and intangible property and interests in real or personal property whether within or outside NZ
   Includes offences, acts and omissions committed overseas that would be an offence in NZ if committed in this country.

2.Engages in a money laundering transaction
- One must conceal property or enable another to conceal the property and then also deal with the property or assist with such dealing.
This includes disposing or transferring the property; bringing or removing the property from NZ; or changing it from one form to another (e.g Purchasing a vehicle)

3. Knowing or believing that all or part of the property is the proceeds of an offence
   -Knowledge is proven via direct evidence (e.g admission) and/or circumstantial evidence
   Knowledge must exist when the property is dealt with (R v Kennedy)

Or being reckless as to whether or not the property is the proceeds of an offence
- Recklessness is the conscious and deliberate taking of an unjustified risk (R v Harney)

Question 5

What is the purpose of the Criminal Proceeds (recovery) Act 2009?

Answer 5

Sec 3 Purpose.

(1) The primary purpose of this Act is to establish a regime for the forfeiture of property-
(a) that has been derived directly or indirectly from significant criminal activity or
(b) that represents the value of a person’s unlawfully derived income

(2) The criminal proceeds and instruments forfeiture regime established under this Act proposes to-
(a) eliminate the chance for persons to profit from undertaking or being associated with significant criminal activity, and
(b) deter significant criminal activity; and
(c) reduce the ability of criminals and persons associated with crime or significant criminal activity to continue or expand criminal expertise; and
(d) deals with matters associated with foreign restraining orders and foreign forfeiture orders that arise in New Zealand

Question 6

Explain an Assets forfeiture order

Answer 6

An Assets Forfeiture Order (AFO) is issued by the High Court on application. This order must be issued but the court on successful application that shows on the balance of probability that specific assets which have been acquired have been tainted by significant criminal activity.

Question 7

Define tainted property

Answer 7

Tainted property (Sec 5)

(a) means any property that has, wholly or in part, been-
(i) acquired as a result of significant criminal activity; or
(ii) directly or indirectly derived from significant criminal activity; and

(b) includes any property that has been acquired as a result of, or directly or indirectly derived from, more that 1 activity if at least 1 of those activities is a significant criminal activity

Question 8

Define what a qualifying instrument forfeiture offence is? (Sec 5)

Answer 8

Offence punishable by 5yrs or more, includes attempt/conspire/accessory if 5yrs

Question 9

Define significant criminal activity (sec 6)

Answer 9

offence punishable by 5yrs, or proceeds etc vlaue is $30,000 or more
Whether or not charged, convicted, acquitted, conviction quashed.
Charges or outgoings used in connection with activity must be disregarded in calculating the value

Question 10

Define unlawfully benefited from significant criminal activity (sec 7)

Answer 10

A person has unlawfully benefited from significant criminal activity if the person has knowingly, directly or indirectly, derived a benefit from significant criminal activity (whether or not that person undertook or was involved in the significant criminal activity)

Question 11

Explain a profit forfeiture order (sec 55)

Answer 11

The High court must make a PO if it is satisfied on the balance of probabilities that-

(a) the respondent has unlawfully benefited from significant criminal activity within the relevant period of criminal activity; and
(b) the respondent has interests in property

Question 12

What was held in Pulman v Commissioner of Police? (Pharmacist, cash tin)

Answer 12

Court held the purpose of the forfeiture regime was not only to prevent the ability of a person to actually profit from undertaking significant criminal activity but also the “chance” that they may be able to do so and also to deter significant criminal activity.

Pulman benefited as soon as he received the cash from purchasers, how he dealt with cash was irrelevant.

Question 13

Define instrument of crime

Answer 13

property used (wholly or in part) to commit or facilitate the commission of a qualifying instrument forfeiture offence

Question 14

What obligation does the prosecutor have in regards to instruments of crime?

Answer 14

Sec142B of Sentencing Act 2002 places obligations on the prosecutor to consider notifying the court of any relevant property that is an instrument of crimes so that forfeiture of that property can be considered as part of the sentencing process. This could include vehicles and property used to facilitate the commission of an offence.
Example; house used in manufacture of meth, vehicle used in the delivery of illegal drugs

Notify the court in writing of the details of the property and the name identifying details of any person (other than the offender) who to the knowledge of the prosecutor has an interest in the property

Practical application- O/C file

Question 15

Explain the restraint of instruments of crime

Answer 15

Property that is an instrument of crime may need to be restrained while the criminal proceedings take their course, to prevent disposal of the asset or erosions of its value by being further encumbered (eg mortgage on a house).
This will require an ‘application for restraining order relating to instrument of crime’ (sec26 CRPRA 2009). Application is on notice (as far as practicable) to any person with an interest in that property. However, application can be made without notice if the Court is satisfied there is a risk the property may be CADD if the notice was given

Question 16

Explain the assessment process for the application for restraining order relating to instrument of crime

Answer 16

Before preparing such an application an assessment process is required. The assessment process is conducted to determine; the value of the asset, equity in the asset, any third party interest in the asset, the cost of action in respect of the asset.
Note: Consultation with the Financial Crime Group is required regarding the cost of action, as it is they who incur the cost associated with assessment and storage (where applicable) of the asset until such time as a final determination is made, by the Courts, in respect of the property.

Question 17

What details are required in the affidavit for the application?

Answer 17

• Officer in charge details
• Offenders details, charges and criminal convictions
• Search warrant – describe the nature of the offending discovered at or involving the property (asset) concerned. Note: Where the value of the asset is high you need to demonstrated that the offending was at more of a commercial level
• Admissions made during the interview
• Property; describe the property sought to be restrained and its value, show the offender owns or has custody of control.

Guidance for completing a restraint application needs to be sought from Prosecutions and/or the Asset recovery unit.

Application may be made with or without notice.

Only members of Asset Recovery Units may apply for restraining orders (apart from those relating to Instruments of Crime), assets forfeiture orders and profit orders.

Question 18

What is an instrument forfeiture order?

Answer 18

Means an order made under s142N of Sentencing Act 2002
Note: Following a hearing under s142K of the Sentencing Act 2002, the court may, if it is satisfied that the property described in the notice given under s142B of the same Act is an instrument of crime, order that the instrument of crime or any part of it specified by the court be forfeited to the Crown.

Question 19

How long is a restraining order valid for?

Answer 19

A restraining order is valid for one year from the date on which the order is made. The court may issue an extension before the expiry of the original order. The extension is also valid for one year. The restraining order remains in force for the prescribed time or until the making or declining of an assets or profit forfeiture order, whichever is the earlier.

Question 20

What points should be covered when interviewing a suspect about money laundering?

Answer 20

• Suspect’s legitimate income
• Suspect’s illegitimate income
• Expenditure
• Assets
• Liabilities
• Acquisition of financial records, from banks, financing companies, loan sharks, family trust documents
• Clarification of documentary evidence located