As leaders in the financial industry, we operate in a landscape of constant change. The markets are more dynamic, the technology more disruptive, and the risks more complex than ever before. In this environment, leaders must reflect on the evolving nature of financial crime, how it impacts the fund management sector, and why a values-based approach is no longer optional but essential for long-term success.

The catalyst for this reflection is the recent release of New Zealand’s 2024 National Risk Assessment (NRA) on Money Laundering. This assessment is more than a regulatory update; for me, it is a call to leadership and a reminder of our fundamental duty to protect the integrity of the capital we manage. It highlights new and accelerating threats that every leader must confront and underscores a reality we have long understood: safeguarding our financial system is a core responsibility, not merely a regulatory hurdle.

1. The New Threat Landscape: What Every Fund Manager Needs to Know
The 2024 NRA provides a clear and sobering view of the primary threats to New Zealand’s financial integrity. To set the context, it identifies three crime types that expose our system to the highest level of threat:

• Fraud, with a specific and urgent mention of the acceleration of cyber-enabled fraud.
• Dealing in illicit drugs, a significant driver of social harm and illicit profit.
• Transnational money laundering, describing the movement of illicit wealth across our borders from crimes that have occurred in foreign jurisdictions.

These threats are not abstract concepts; they are active and persistent challenges. According to the FMA’s 2021 Sector Risk Assessment, sectors like ours—Managed Investment Schemes (MIS)—can unwittingly play a specific role in this process. We are most likely to be used in the layering and integration stages of money laundering. This is the sophisticated phase where criminals attempt to disguise illicit funds by moving them through a series of transactions, making them appear legitimate before they are integrated back into the economy. Our role as gatekeepers, therefore, has never been more critical.

2. From Broad Threats to Sector-Specific Challenges
While the NRA paints the national landscape, the FMA’s 2023 MIS Sector Risk Assessment zooms in on the specific pressures we as fund managers navigate daily. It brings into sharp focus the operational, governance, and investment pressures we manage every day, revealing a crucial insight: while governance risks are high before mitigation, operational risks prove more resilient.

• Operational Risk: This is identified as the highest risk category for MIS managers post-mitigation. It encompasses a wide range of potential vulnerabilities, including those arising from complex product offerings, the oversight of outsourced services, and the ever-present threat of cyber-security attacks.
• Governance Risk: While identified as the highest risk before mitigation, effective controls reduce it significantly. Still, it remains a critical challenge, addressing the internal frameworks that guide our firms. This includes ensuring robust board oversight, managing key person risk, and ensuring our systems and processes keep pace with business growth.
• Investment Risk: Beyond our internal operations, we must manage risks driven by external forces. These include the impact of macroeconomic factors on portfolios and the complexities associated with introducing new or novel financial instruments, such as cryptocurrencies, which present unique risk profiles.

Navigating this complex web of national threats and sector-specific risks requires more than a compliance checklist. It demands a deeply embedded culture of vigilance and integrity that informs every aspect of our operations.

3. Our Compass: Anchoring Our Strategy in Core Values
Our conviction at NetFunds is that the only durable response to these challenges is one anchored in our core values. These values are not just brand messages; they are the operating system for every decision we make, providing a clear compass in a complex world. Each value serves as a strategic countermeasure to the risks we face.

Integrity: Our Foundation
At NetFunds, we say that “Integrity is our operating system — it informs every decision, every mandate, and every relationship. Without it, nothing above the line is possible.”
This value is our primary strategic tool for mitigating the high Governance Risk identified by the FMA. In practice, it means we treat our Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) obligations not as a regulatory burden but as a fundamental component of responsible stewardship. The law mandates a comprehensive risk assessment and an independently audited AML/CFT programme. For us, these are the mechanisms for ensuring our board oversight is robust, our processes are sound, and we build enduring trust with our investors and partners.

Growth: Principled and Durable
At NetFunds, we say that “Growth is only valuable when it is principled.”
Sustainable growth is impossible without disciplined execution. We apply this principle directly to our AML/CFT responsibilities as a direct response to the national threats of transnational money laundering and cyber-enabled fraud. It means being exceptionally vigilant about customer due diligence (CDD). We make it our business to understand the source of funds and wealth of our clients, particularly in higher-risk situations. This discipline prevents our firm and our investors from being compromised by illicit funds and ensures the growth we achieve is both durable and investable.

Partnership: A Collective Defence
At NetFunds, we say that “Partnerships built on demonstrable growth and integrity create true alignment.”
The fight against financial crime cannot be won in isolation. We view it as a collaborative effort — a partnership. This begins with our clients, where we are transparent about our due diligence requirements. It extends to our relationship with regulators, where we maintain open communication and report suspicious activity without hesitation. Finally, it involves our partnership with the broader financial community, because protecting the integrity of one firm means helping to protect the entire system from sophisticated, networked threats.

Legacy: Building a Resilient Future
At NetFunds, we say that “Legacy is not declared — it’s the cumulative outcome of operating with integrity, delivering growth, and forging long-term partnerships.”
Ultimately, a firm’s legacy is defined by its reputation. By embedding our values into every facet of our AML/CFT culture, we are building more than just a successful business; we are building one that can achieve intergenerational impact and sustainable wealth creation. This commitment to integrity is how we safeguard our reputation, the wealth of our clients, and our collective future.

Conclusion: Our Unwavering Commitment
In this high-risk environment, integrity is not a static asset but our most dynamic strategic advantage. A robust compliance framework is not just a defensive measure; it is a proactive strategy for building a resilient, trustworthy, and enduring firm.

For us at NetFunds, this is not a matter of debate. Our commitment to robust compliance is a direct and tangible expression of our core values. We are committed to being vigilant guardians — of our investors’ capital, our partners’ trust, and the very integrity of the markets we serve.

— Michael Karabassis, Director