Proliferation Financing Risks
Summary
Proliferation financing is the act of raising funds or providing financial services for the manufacture, production, possession, acquisition, stockpiling, storage, development, transportation, sale, supply, transfer, export, transhipment or use of weapons of mass destruction (whether nuclear, chemical or biological) and the provision of technical training, advice, service, brokering or assistance related to any of these activities.
While the Anti-Money Laundering Act does not contain explicit requirements that you manage and mitigate your proliferation financing risks, the supervisors note that discharging your anti-money laundering obligations may assist you in mitigating such risks. In addition, the Associate Ministry of Justice is working to include counter-proliferation financing under the anti-money laundering umbrella. With that in mind, let’s look at New Zealand's vulnerabilities.
New Zealand does not have significant manufacturing sectors related to high-tech or nuclear-related goods. But, it is important to consider manufacturing weapons and funding the manufacture of weapons as separate risks. The financing of the production of weapons of mass destruction may pass through banks that are located in New Zealand or companies registered in New Zealand, even if no weapon manufacturing occurs within New Zealand itself.
Proliferation financing risks are largely coming from North Korea and Iran, where criminals and state-sponsored groups engage in procuring sensitive goods, like technologies, and materials that can be used for developing weapons; they source skilled workers to construct these weapons; and they raise revenue to purchase the expensive technology and components.
The predominant proliferation financing risks for reporting entities are:
The use of money service businesses, like banks, money remitters, or crypto services, by bad actors to send money abroad and finance the proliferation of weapons of mass destruction.
The use of professional services by bad actors to incorporate a company to raise funds or to support the purchase of sensitive goods that can be used for developing weapons.
Other high-risk sectors are those involved in the production or sale of certain types of materials, which can be used for weapon manufacturing. Those materials are called dual-use items and are, for example, telecommunication equipment or certain chemicals. As a reporting entity, you might be less exposed to these risks.
What’s next?
Get in touch for a free consultation to talk about your proliferation financing risks.
