The past few years have seen a number of law changes which have impacted our service with no real value added to the transactions we complete for our clients. To name but a few, there has been increased compliance with the introduction of the Bright line test and the associated land transfer tax statement, and an increased level of form filling has become the norm due to common reporting standards, and the Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT). It doesn't stop there. Phase two of AML/CFT is due to come into force in July 2018 and will directly affect lawyers and as a result our clients.
The purpose of AML/CFT is to identify money laundering and discourage those wishing to undertake such activities from doing so in New Zealand. This helps to ensure other jurisdictions have faith in our financial systems. From July 2018, lawyers will be expected to act as a "gatekeeper" as we are a service provider that undertakes a large amount of financial transactions. We are required to have processes and controls in place to recognise potential instances of money laundering which is then escalated to enforcement units who monitor such instances.
Many of you who deal with banks may already be aware of the increased level of "due diligence" they undertake when dealing with new accounts (even for longstanding customers), law firms will now be subject to a similar level of scrutiny and compliance.
In order to meet the requirements of AML/CFT law firms must:
- Have a designated compliance officer in senior management;
- Establish and uphold assessment of its AML/CFT risks;
- Establish and uphold policies, processes, controls, measures and maintenance of records on an ongoing basis;
- Conduct due diligence on their clients and the source of client funds;
- Monitor client accounts insofar as recognising changes and patterns that may raise red flags;
- Train staff members to guarantee awareness of AML/CFT requirements;
- Independently audit their risk assessment and ongoing AML/CFT measures;
- Report concerns to the appropriate authority; and
- Submit annual reports to supervisor and respond to supervisor reviews.
These requirements will have an impact on how we deal with you as clients. For example, it may appear that we require a lot of detail to verify your identity even though we have worked with you over a number of years and understandably this could be cause for frustration.
We hope understanding what we need to comply with will help explain an increase in scrutiny and we are working on processes that will make this increase in compliance workable for our clients.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.