If you are a lawyer, accountant, real estate agent, conveyancer, high-value goods dealer, or gambling service provider (Phase 2 Entities), it is important that you have an implementation plan for Phase 2 of the Anti-Money Laundering and Counter Financing of Terrorism Act 2009 (AML/CFT Act).
Following the Panama Papers scandal, there has been strong public support for the introduction of more stringent anti-money laundering rules. According to a Ministry of Justice, of criminal funds being laundered in New Zealand, 56% involves the purchase of real estate and 25% involves the work of lawyers and accountants.
Phase 2 of the AML/CFT Act is currently being considered by the Ministry of Justice. An exposure Bill was expected to be introduced at the end of this year, but has been postponed to early 2017 due to the expected significant high compliance costs for Phase 2 Entities (an estimated $1.6 billion over 10 years). The target implementation date is July 2017, and indications from government are that the transition period will be very short.
It remains to be seen how the government will balance public interest in curbing the laundering of criminal funds in New Zealand, with rising compliance costs for businesses.
Currently, Phase 2 Entities need only verify the identity of persons paying $10,000 or more in cash, or when the transaction appears suspicious, whereas Phase 2 will propose additional obligations for Phase 2 Entities, such as a requirement to:
- carry out and maintain a detailed AML/CFT risk assessment and compliance programme
- appoint a Compliance Officer to administer and maintain the AML/CFT programme
- conduct customer due diligence (asking for, and verifying customers' identification) in a wider range of circumstances
- conduct enhanced customer due diligence (verifying source of funds) when conducting high-risk transactions
- retain records of documents associated with transactions (including the nature, amount, currency, date, and parties involved) for not less than 5 years
- proactively report transactions or proposed transactions to the Financial Intelligence Unit if there is a reasonable suspicion they involve money laundering or the proceeds of crime
- meet audit and annual reporting requirements
- be supervised by an appropriate authority
We will continue to monitor the AML/CFT Act for legislative progress. If you have any questions regarding Phase 2 of the AML/CFT Act, please contact our Financial Services team.
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.