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Is your Accountant or Solicitor Washing Money like Ozark?

September 11, 2017

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Is your Accountant or Solicitor Washing Money like Ozark?

September 11, 2017

 

 

On 10 August 2017 the Anti-Money Laundering and Countering Financing of Terrorism Amendment Act 2017, (the Act), was passed. The Act brings lawyers, conveyancers, accountants, real estate agents, sports and race betting, and businesses that deal in certain high value goods (e.g. cars, boats, jewellery, precious metals and stones, artefacts and art) into the existing AML/CFT regime (in force since June 2013). Collectively these businesses (aka Phase Two entities) come under the Designated Non-Financial Business or Profession (DNFBPs) category defined in section 5 of the Act. DNFBPs have similar potential to financial institutions to be used for money laundering.

The Department of Internal Affairs is the AML/CFT supervisor for the Phase Two entities.

 

How will the Act be implemented?

The Act will be implemented in stages:

  • 1 July 2018: Lawyers and conveyancers

  • 1 October 2018: Accountants

  • 1 January 2019: Real estate agents

  • 1 August 2019: High value goods dealers and the New Zealand Racing Board (which administers sports and racing betting)

Note that these dates could be brought forward by an Order in Council.

 

What does the Act cover?

Phase Two entities are required to comply with the Act with effect from the date specified, only if they provide certain specified services in the ordinary course of the business. For a full description of activities refer section 5 of the Act – meaning of designated non-financial business or profession. Some of the activities that will attract obligations under the Act include:

  • Acting as a formation agent of legal persons or legal arrangements;

  • Acting as, or arranging for a person to act as, a nominee director or nominee shareholder or trustee in relation to legal persons or legal arrangements;

  • Providing a registered office or a business address, a correspondence address, or an administrative address for a company, or a partnership, or any other legal person or arrangement (unless it's solely for a service which isn't covered by the Act);

  • Managing client funds, accounts, securities, or other assets;

  • Providing conveyancing services as part of the sale or purchase of real estate;

  • Buying or selling jewellery, precious metals, precious stones, watches, motor vehicles, boats, art or antiquities, and:

    • accepting or making cash payments of $15,000 or more in one transaction, or

    • accepting or making a series of related cash payments that total $15,000 or more.

Changes to the regime for existing reporting entities

The Act also expands the obligation to report suspicious matters for ALL reporting entities (including those who were covered by the Act prior to its amendment). This is done by requiring ALL reporting entities to report to the financial intelligence unit of the Police (the FIU) on suspicious activities, NOT just on suspicious transactions.

This change, currently scheduled to come into effect from 2 July 2018, was perhaps prompted by concerns that valuable financial intelligence for detecting crime was not being passed onto the FIU in circumstances where suspicious or unusual activities did not involve a transaction. Existing reporting entities will require to CHANGE all references to Suspicious Transaction Reports (STRs) to Suspicious Activity Reports (SARS). In addition, changes will need to be made to AML/CFT programme, and monitoring programmes, to ensure that a much wider range of information is captured and considered for possible reporting to the FIU.

The Act also facilitates a possible reduction in compliance costs by expanding the scope of designated business groups and allowing increased reliance, for compliance, by reporting entities on other reporting entities.

 

What is required to be done under the Act by Phase Two entities?

  • Appoint an appropriate person in the business as an AML/CFT compliance officer;

  • Assess the risk to the business of money laundering and financing of terrorism, and document the same (i.e. prepare the Risk Assessment);

  • Prepare a written AML/CFT Programme setting out how the identified risks will be detected, and managed;

  • Undertake regular reviews of the Risk Assessment, and AML/CFT Programme;

  • Undertake initial and on-going customer due diligence on their customers;

  • File suspicious activity reports in relation to any suspicious activity they detect;

  • Maintain appropriate records for the prescribed duration;

  • Prepare an annual report on their AML/CFT programme; and

  • Have the Risk Assessment and the AML/CFT programme audited once every two years (or earlier if required by the AML/CFT Supervisor) by an independent auditor.

     

     

     

     

     

     

     

     

     

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