What happened when $2.7m arrived in a backpack
Thursday, 2 June 2022
More than five years ago, Robert Bell put on some jandals, a dirty pair of shorts and a borrowed hoodie and stepped on to a plane from Australia to Fiji with $2.7 million in his backpack.
When his plane landed he realised he probably should have packed something else: a money counter.
“The customs officials at the airport don’t have cash counters. So I was like ‘look I declare $2.7m, here it is, and they’re like ‘oh, we’ve got to count that’,” Bell says.
“They had all the customs officials, like seven of them, counting cash [and] I’m like watching this cash like crazy … so I learned to take cash counting machines in the future.”
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**
Back in 2016, when Bell donned his hoodie, a High Court decision had affirmed the ability of banks to deny money transfer and remittance companies bank accounts under anti-money laundering and countering financing of terrorism (AML-CFT) regulations.
These rules are meant to ensure that financial organisations identify where customers’ cash is coming from, to clamp down on crime.
Bell’s company, KlickEx, would go on to be named one of the fastest growing in the Asia Pacific in 2018, and by that stage Bell had already been named NZ Hi-Tech young achiever of the year (twice), an “executive to watch” by US-based Bank Innovation magazine and community banking innovator of the year by the UK-based Royal Chartered Institute of Bankers.
But Bell was racking his brain trying to find ways of helping his digital money transfer business move money across borders without a bank account.
There were only a limited number of flights per day between New Zealand and the Pacific Islands, making it too risky to rely on flights alone to transport the cash.
Bell needed other methods so he could spread his risk.
Another idea was to buy one 160-foot oil tanker, and two decommissioned warships.
The idea was the oil tanker would refuel the decommissioned warships so that they could transport cash across the Pacific Ocean.
“We even talked to the New Zealand Navy about what they knew about piracy risks, and the risks of these boats getting intercepted by people.”
He purchased the tanker, but before he could purchase the decommissioned warships Reuters had published a story about Bell’s situation and the New Zealand Government stepped in to keep his company’s bank accounts open.
That money is a lifeline to people in the Pacific who rely on regular and cheap money transfers from friends and family through companies like Bell’s.
A report from 2014 shows remittances made up over 15% of Samoa’s GDP and more than 25% of Tonga’s.
Transporting millions of dollars of cash using backpacks and decommissioned warships might seem like the kind of activity AML-CFT laws were designed to prevent, but critics like Bell say banks are interpreting anti-money laundering rules in a way that makes illegal activity harder to trace because they are cutting companies and people off from the formal banking system.
“They’re cutting off the ability to follow the money, that’s rule number one: follow the money.
“And if you have everyone running informally, how are you supposed to follow the money?”
Bell estimates 60% of remittance companies can’t get bank accounts thanks to AML-CFT rules.
Money remitters transfer money quickly and cheaply by taking money from depositors in New Zealand and then asking their representatives in the Pacific Islands to pay out the same amount of money over there.
Stuff reported one money remitter is carrying thousands of dollars around in his backpack because his remittance business has been “de-banked”.
Another money remitter, Sarah, says she is stressed and scared from having to drive around town making cash pick-ups and drop-offs because her business isn’t allowed to operate a bank account.
When the bank found out she was using her personal bank account for some deposits they cut off her personal accounts too, prompting her to write a letter begging for her bank account back.
“I said ‘I’m so sorry I banked the money there because I had too much on me and I was too scared’.”
Sarah is not her real name, but a pseudonym that has been given to her to protect her business – which has already been broken into once before.
“I cannot have a normal savings account with any bank at the moment … I have a business and no bank account.”
New Zealand banks view businesses like money remittance companies as too risky to have bank accounts. Money remitters and other reporting entities are required to keep records of the identities of the people and institutions who make these deposits as well as report suspicious transactions.
However, when money remitters go to deposit their funds in a bank the bank just sees a series of unexplained irregular deposits.
New Zealand Bankers Association chief executive Roger Beaumont says banks are making AML-CFT decisions by looking at the risks associated with each individual entity.
“The drive for business is balanced with the need to identify and manage risk, including compliance with the regulatory framework in which they operate, especially AML-CFT legislation.
“These are commercial decisions for the banks themselves, made on a case-by-case basis.”
Laws and directives protecting money remittance companies from anti-money laundering laws have been passed by lawmakers in the United States and the European Union, but the New Zealand Government and the Reserve Bank have not taken similar steps.
KlickEx is participating in a judicial review of the Reserve Bank over the “debanking” of money remitters – the other parties to the case are Ink Patch Money Transfer, Samoa Money Transfer and Samoa Finance Money Transfer.
Both the New Zealand Government and the Reserve Bank have recognised the importance of money remitters in the past.
Money remitters were classified as an essential service during the Covid-19 lockdowns and Reserve Bank Governor Adrian Orr made a statement last year that said: “Anti-money laundering laws are not an excuse to ‘de-bank’ or ‘de-risk’ from the Pacific Islands”.
Sarah says companies like hers are important because they allow for same-day transfers with low-fees.
“It works for people that are really in need of the money, like for funerals, like if they want to take somebody to hospital and they don’t have money.
“Some families are just depending on their families here.
“That’s why they send them here to come work here and send money back, to help with the everyday: Help with the power, help with the water rates, or [help with] looking after an old person in the family.”
Bell says the low-fee aspect of things is important too, especially in the context of the Pacific Islands where the only option is to use much costlier international bank transfer methods.
“An extra $10 or $5 a week going to the Pacific, that’s a whole chicken – so that’s a whole day’s meal for the family back home.
“So they can’t get together and go ‘we’re going to solve this by getting lawyers involved’, they can’t do it.”