Wellington, Sept 25 NZPA - Legislation tightening up on money laundering contains a flaw that will make it easier for criminals to dispose of their ill-gotten gains, a specialist in the field says.

When Justice Minister Simon Power introduced the Anti-Money Laundering and Countering Financing of Terrorism Bill, he told Parliament its provisions would help the fight against illegal drugs, particularly methamphetamine.

That may not be the case, Wellington-based anti money laundering (AML) specialist Phil Divett told NZPA.

In its present form the bill contained flaws that might benefit criminals, he said.

The bill passed its first reading on a unanimous vote, was sent to the foreign affairs and defence select committee for scrutiny and public submissions, and was now in the House for its final stages.

Mr Divett, a former lawyer who until 2005 carried out AML work across several government agencies for the Justice Ministry, made submissions to the select committee.

He has also written to Mr Power, but appeared to have failed in his efforts to close what he says is a loop-hole.

"This bill is meant to stop drug dealers, making it difficult for criminals to launder money and profit from their crimes," he told NZPA.

While largely a solid piece of legislation, the bill did not deal effectively with the criminals -- the highest risk, he said.

Of specific concern was the select committee's failure to make it clear whether regulated businesses were expected to take publicly available information such as news reports into account when assessing the money laundering risk associated with their customers.

It was possible businesses might be aware of news reports indicating customers had prior convictions, but not be under any express obligation to consider these when assessing risk, he said.

"This seems a bit odd when these are the very people that are being targeted by the legislation."

Businesses were required only to consider the "type" of customer when assessing money laundering risk, he said.

The bill did not make it clear they had to consider publicly available information indicating customers had been convicted of money laundering, or related offences such as drug dealing.

In contrast it did impose clear obligations on businesses to identify foreign politicians -- known as politically exposed persons or PEPs -- by using public domain information.

That meant, for example, Australian Prime Minister Kevin Rudd would have to be investigated thoroughly if he wanted to bank money.

In contrast, a gang member would not have to undergo the same scrutiny as Mr Rudd, even if their name had been in recent news reports for related criminal offences.

"I can only assume that the Government and the select committee considered this anomaly and reached the view, for whatever reason, that this was the way the legislation would be worded," Mr Divett said.

Changes can be made to legislation in the final stages of passage but Mr Divett considered it unlikely the Government would move to close the loop-hole.

New Zealand has been used to launder millions of dollars of criminal proceeds, Mr Power told Parliament when the bill was introduced.

The international Financial Action Taskforce had set standards and was demanding compliance from all countries.

The bill would enable law enforcement agencies to tackle trans-national organised crime head on, he said.

NZPA