Sports and racing betting and AML/CFT

Betting services are at risk of being exploited by criminals to launder money. The New Zealand Racing Board is among organisations that will be affected by proposed changes to the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act.

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The New Zealand Racing Board administers all racing and sports betting in New Zealand. It will need to put AML/CFT measures in place once ‘Phase 2’ of the Act comes into effect.

This will help prevent money laundering, make it easier for authorities to find out where ‘dirty’ money came from, prosecute criminals, seize illegally earned money and assets, and stop crime.

Here’s a summary of the proposed changes.

What gambling services will have to comply with the Act?

The Board will need to put AML/CFT measures in place when it:

  • provides accounts to customers for gambling or betting
  • carries out cash transactions of $10,000 or more

AML/CFT measures will not apply to class 4 gaming services provided by the Board (that is, gaming machines in its retail outlets). Customers who use these don’t set up accounts and there’s a low risk criminals will use gaming machines to launder money.

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Why will the AML/CFT Act apply to the Board?

Criminals use betting services to launder illegally earned money, so it looks like they made it legally from gambling.

For example, they may store money in betting accounts for a short period before taking it out. They may pool together funds from multiple sources, which makes it harder to trace where it came from. Even if they lose some money gambling, they still win enough back to make it worth their while, because their ‘dirty’ money is now ‘clean.’

Introducing AML/CFT measures will deter criminals from using betting services and help detect them if they do.

Importantly, it will also strengthen the overall AML/CFT system. Gambling services provided by casinos have been covered by the Act since 2013. Also, the Board may detect ‘red flags’ that banks and other financial service providers who interact with the same customers might not pick up, because the Board may have more information about the people and funds involved.

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What will the Board have to do to comply with the AML/CFT Act?

Initially, you’ll have to:

  • designate someone in your business as an AML/CFT compliance officer
  • assess and document the money laundering and terrorist financing risks your business may face
  • establish an AML/CFT compliance programme setting out how you’ll detect and manage these risks.

On an ongoing basis, you’ll have to:

  • verify the identity of new customers before providing any service covered by the AML/CFT Act (see question 1 above). In some circumstances (such as if they represent a company or trust), you may also need to ask for information about where money came from and the other people involved. For more information about verifying customers’ identities, see:
    Information for customers about anti-money laundering laws
  • submit a Prescribed Transaction Report to the Police Financial Intelligence Unit (FIU) if a client wants to conduct a transaction in cash that is more than $10,000
  • monitor all customers’ accounts to identify potential warning signs of money laundering and terrorist financing. You must report any suspicious transactions or activity to the FIU. For more information, see:
    Reporting suspicious activities
  • regularly review your risk assessment and compliance programme
  • have your risk assessment and compliance programme audited every 2 years
  • submit an annual report to the Department of Internal Affairs, which will supervise your sector.

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What can the Board do to reduce its compliance costs?

For information about ways to reduce compliance costs, see:

Working with others to reduce your AML/CFT compliance costs

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What help and oversight will be available?

It’s proposed that the Department of Internal Affairs (DIA) will supervise the Board, as well as other businesses that Phase 2 of the Act will apply to. It will help you comply with the law and enforce it when needed. Some of the things DIA will do include:

  • helping you understand how criminals could use your services to launder money or finance terrorism
  • providing support and guidance to help you identify money laundering ‘red flags’ and to comply with AML/CFT laws
  • investigating and taking action if you don’t meet your obligations.

For more information, see:

AML/CFT supervision and support for businesses

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When will the Board need to start complying with the Act?

The Government intends to pass the law around the middle of 2017.

After that, businesses will have a period of time to prepare for the changes. It’s proposed the Board will have to comply 24 months after the Bill is passed.

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