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The new Anti-Money Laundering and Countering Financing of Terrorism Laws

By Gibson Sheat

The new Anti-Money Laundering and Countering Financing of Terrorism Laws

Anti-money laundering has recently been in the spotlight in New Zealand with the Ministry of Justice estimating that almost NZ$1.35 billion from fraud and illegal drugs is laundered through ordinary New Zealand businesses each year.

To help combat this kind of criminal activity, New Zealand’s anti-money laundering laws have been amended through the Anti-Money Laundering and Countering Financing of Terrorism (“AML/CFT”) Amendment Act 2017 (“Amendment Act”).

It is intended that this Amendment Act will put in place practical measures to protect businesses and make it harder for criminals to profit from and fund illegal activity. The amendments have been designed to closely align with international best practice.

Phase 1 of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (“Act”) has been in force since 2013. This applies to banks, casinos and a range of financial service providers. All other businesses are currently exempt from the set of compliance obligations for “reporting entities” (discussed below).

The Amendment Act essentially puts in place "Phase 2" of New Zealand's AML/CFT laws.

Phase 2 brings more businesses into the AML/CFT regime. The regime will require compliance by lawyers, conveyancers, accountants, real estate agents, the New Zealand Racing Board, businesses that provide trust and company services, and businesses that deal in certain high-value goods (“high-value dealers”).

The new laws will be implemented over time to give businesses time to implement the changes. Lawyers will be the first to comply, starting on 1 July 2018, closely followed by accountants on 1 October 2018, Real estate agents have until 1 January 2019 to comply, while high-value dealers and the New Zealand Racing Board, have until 1 August 2019. Because these are relatively short implementation timeframes, affected businesses need to start preparing to meet their compliance obligations as early as possible.

As a business owner, the first thing you need to do is to determine whether you have obligations under the Act is to understand the term “reporting entity”. If your business is a reporting entity, you will need to take the necessary steps to ensure compliance with the Act.

An entity is a reporting entity, if it is a bank, casino, financial institution, high-value dealers, the New Zealand Racing Board, or 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’ in section 5(1) of the Act. These activities are basically of two kinds:

  1. Gatekeeper functions (e.g. managing customer funds)

  2. Trust and company service provider functions (e.g. setting up companies or trusts for customers).

The Act imposes a number of obligations on reporting entities, including:

  • The appointment of an AML/CFT Compliance Officer;

  • Carrying out an assessment of the money laundering and terrorism financing risk a business may face;

  • Designing a written compliance programme (AML/CFT programme) that sets out procedures, policies, and internal controls to address identified risks among other things;

  • Registration on GoAML (an internet platform used to use to report all suspicious matters to the New Zealand Police’s Financial Intelligence Unit); and

  • Implementation and maintenance of an AML/CFT Programme, which includes:

    • Reporting suspicious transactions.

    • Submitting prescribed transaction reports (a domestic physical cash transaction of NZ$10,000 or more; or an international wire transfer of NZ$1,000 or more); and

    • Filing an annual report with the relevant AML/CFT supervisor every year.

Penalties for non-compliance are severe and can be as high as NZ$5 million for businesses and up to $300,000 and two years in prison for individuals. In light of this, it may be best to be cautious report any potentially suspicious transactions. Not only does this take the matter off your hands, but also ensures that you are generally protected from civil, criminal and disciplinary proceedings and should avoid fines, injunctions and imprisonment. 

 

If you have any questions surrounding your compliance with the upcoming AML requirements please contact James Wilkinson, Rhys Williams or your usual advisor at Gibson Sheat. 

James Wilkinson       P: 04 916 6305       E: james.Wilkinson@gibsonsheat.com
Rhys Williams           P: 04 916 6452       E: rhys.Williams@gibsonsheat.com

 

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