- The new laws extend current anti-money laundering and counter-terrorism laws to cover more businesses, including accountants in public practice.
- The changes also affect banks, casinos and financial service providers who have had to comply since 2013.
- It will become harder for criminals to use everyday New Zealand businesses to profit from and fund illegal activity.
Each year, about NZ$1.35 billion from the proceeds of fraud and illegal drugs is laundered through everyday New Zealand businesses. In order to combat this criminal activity, New Zealand’s anti-money laundering laws have been amended.
The new laws extend the current legislation to cover more businesses including many accountants and lawyers, real estate agents and conveyancers, some businesses that deal in expensive goods and betting on sports and racing.
The new laws also make some changes that affect businesses including banks, casinos and a range of financial service providers who are already subject to the legislation.
The amendments have been designed to improve New Zealand’s ability to tackle money laundering and terrorist financing and result in New Zealand being more closely aligned with international best practice.
The anti-money laundering regime is activity based. Accountants undertaking activities subject to the regime must be ready to comply with the new requirements from 1 October, 2018. The supervisor for all newly-affected businesses is the Department of Internal Affairs (DIA).
Who’s in and who’s out?
The first thing you need to do is determine whether your business is in fact a reporting entity.
An entity is a reporting entity if, in the ordinary course of business, it carries out one or more activities described in the definition of designated non-financial business or profession (DNFBP) in section 5(1) of the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act 2009.
Such activities can be split into two types:
1. trust and company service provider functions (ie setting up companies for customers)
2. gatekeeper functions (ie managing customer funds).
Regulations and guidance are currently being drafted to help clarify what accounting services are captured under the Act. Regulations relevant to accountants will be finalised in early 2018. This will be followed by guidance due to be published by 31 March, 2018.
Related: Audit Conference 2017
Learn how Phase 2 of AML will affect your audits at the flagship event for external auditors. Join us in Auckland on November 24.
What else do you need to do?
The effective dates are staggered. First off are lawyers and conveyancers starting on 1 July, 2018 closely followed by accountants on 1 October, 2018, whilst real estate agents have until 1 January, 2019 to comply. For high-value dealers and the New Zealand Racing Board its 1 August, 2019. These are short implementation timeframes, so affected businesses will need to start preparing to meet their compliance obligations as soon as possible.
Before the effective date, you will need to:
- Appoint an AML/CFT Compliance Officer.
- Produce a written Risk Assessment that assesses the risks your business faces.
- Establish a written AML/CFT Programme that contains internal procedures, policies and controls to address identified risks.
- Register in GoAML so you can submit suspicious activity reports and prescribed transaction reports to New Zealand Police’s Financial Intelligence Unit (FIU).
There are external consultants that develop Risk Assessments and AML/CFT Programmes. However, before engaging the services of a consultant, you should carry out your own due diligence to ensure they have the necessary skills and expertise.
After that, you will need to:
- Run your AML/CFT Programme, which includes:
- Vetting any staff engaged in AML/CFT related duties.
- Training of any employees engaged in AML/CFT related duties.
- Conducting customer due diligence (CDD), including ongoing customer due diligence and account monitoring.
- Submitting suspicious activity reports.
- Submitting prescribed transaction reports (a domestic physical cash transaction that is NZ$10,000 or more; or an international wire transfer that is NZ$1,000 or more).
- Keeping records (remember – if it’s not documented it’s not done!).
- File an annual report with the supervisor every year by 31 August.
- Get an independent audit of your Risk Assessment and AML/CFT Programme every two years by an independent and appropriately qualified person.
What’s in it for you?
Whilst some these requirements will impose new costs on affected businesses, there are also benefits to business from complying with the regime – in addition to protecting yourself from enforcement action.
Firstly, many businesses find that doing a Risk Assessment gives them an insight into their business which helps in overall business improvement.
Secondly, the AML/CFT Programme helps you keep criminals out of your business. This means you are protecting your own business from exploitation, for example by fraudsters who might want to deceive you – as well as doing your bit to protect the public from criminality.
Thirdly, the Act brings New Zealand into line with reputable business practice in the rest of the world. Many countries now have legislation preventing businesses from working with other businesses that are not set up to do AML/CFT properly, or that are in a country that has poor standards of AML/CFT compliance. By complying with the Act, you protect your firm’s ability to do business locally and internationally.
Finally, by complying with the Act, you protect the reputation and integrity of your business.
Over the next few months, the Ministry of Justice will consult on the regulations and the FIU will issue a revised National Risk Assessment in November. The DIA will produce a Sector Risk Assessment for accountants in December and in early 2018, the DIA will also run sector-specific nationwide roadshows with the FIU.
The DIA also produces a newsletter, AML/CFT News, which you can subscribe to here.
Find out more about Phase 2 of the AML/CFT measures here.
In Australia, there is still no sign of the second phase of the legislation, although the Attorney General’s Department project plan anticipates a consultation paper in the second half of this year.
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