AML/CFT – A Laundry List of Compliance Measures!

By Janine Hellyer, Director, BDO Tauranga Ltd

If you’ve had any dealings with a lawyer recently you will no doubt already have encountered New Zealand’s anti-money laundering laws.

The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 has been around a while (since 2013) but its application was fairly limited (mainly affecting the banks) and it was ‘business as usual’ for most businesses and professionals.

But times have changed and governments worldwide have been moving to strengthen their commitment to monitoring financial activity.  The aim is to reduce or eliminate money laundering, thereby cutting off the source of funds to finance international terrorism.  (In New Zealand alone, it is estimated that $1.35 billion from the proceeds of crime is laundered through businesses every year.)

In 2017 the New Zealand parliament passed an amendment to bolster the existing law.  This amendment extended the act to apply to lawyers, conveyancers, accountants, real estate agents, sports and racing betting agencies and businesses that deal in high value goods (eg art and antique dealers, motor vehicle dealers, boat dealers and jewellers).

The amendments are being implemented progressively, with lawyers and conveyancers coming into the regime from 1 July 2018.  Accountants are required to comply with the new rules from 1 October 2018, real estate agents from 1 January 2019 and the remainder will be in from 1 August 2019.

So what’s covered?

These entities are required to comply only if they provide certain specified services eg acting as a formation agent, providing a registered office or business address, providing real estate conveyancing services, managing client funds and buying or selling high value items.  These services are defined very widely and the act casts a wide net, capturing a vast swathe of entities and individuals.

Customer Due Diligence

If the business provides one of these specified services to a customer it is required to carry out Customer Due Diligence (‘CDD’) on that customer.  This is all about verifying the identity of those you do business with and knowing your client.  The client’s risk profile will determine the level of CDD required – Simplified, Standard or Enhanced.  Each has different levels of information required with Enhanced the most comprehensive.  Simplified CDD will apply to very few customers as it is limited to banks, insurers, local authorities, government organisations and the like, so Standard is effectively the starting point.

The risk profile is assessed by reference to the nature of the entity (trusts and companies being considered inherently riskier), country of residence of the beneficial owners, the background of the individuals involved (eg a ‘politically exposed person’), the nature of transactions etc.  It is necessary to trace back through the ‘layers’ of companies, trusts and partnerships to find the individuals who are the beneficial owners and those who control the entity.  A beneficial owner is always a natural person.
While the risk assessment may be somewhat subjective you can expect that a conservative (more rather than less) approach is likely to be the norm.

What information do you have to provide?

At the least you can expect to have to provide proof of your identity and residential address.  You will need to show the originals or certified copies may be acceptable in some cases.  Documents proving address must be less than 3 months old, on letterhead and in English.  For trusts you will need to provide more detail including copies of trust deeds and details of beneficiaries.  If Enhanced CDD is required you will be asked to provide details of the source of wealth; this could include obtaining copies of historic Sale & Purchase Agreements, Gift Deeds, or copies of wills or legal correspondence for inheritances received.

So, having already provided this information to your lawyers and sharebrokers, you can now expect another round of requests for information to prove your identity and residential address and, in some cases, to prove the source of your wealth.  This may be so even where you are a long standing client or customer of the firm you are dealing with.

If you would like to find out more about the AML/CFT and how this may affect you, please contact our office and we will be happy to assist.

Disclaimer: This article is general in nature and should not be treated as professional advice. It is recommended that you consult your advisor. No liability is assumed by BDO Tauranga Ltd for any losses suffered by any person relying directly or indirectly upon the article above.

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