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 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 practical measures in place that will protect businesses and make it harder for criminals to profit from and fund illegal activity. The amendments appear to 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 now extends to require compliance by lawyers, conveyancers, accountants, real estate agents, sports and race betting, 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 a two-year period to give businesses time to implement the changes. Lawyers and conveyancers will be the first sectors that will have to comply, starting on 1 July 2018, closely followed by accountants on 1 October 2018, while real estate agents have until 1 January 2019 to comply. For high-value dealers and the New Zealand Racing Board, the effective date is 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 to determine whether you have obligations under the Act is to understand the term “reporting entity”. Once you have established that your business is a reporting entity, you can start undertaking the necessary steps to ensure your 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:
- Gatekeeper functions (i.e. managing customer funds); and
- Trust and company service provider functions (i.e. setting up companies for customers).
The Act imposes a number of obligations on reporting entities and these obligations cannot simply be contracted out of. The obligations include:
- The appointment of an AML/CFT Compliance Officer;
- Carrying out an assessment of the money laundering and terrorism financing risk your business may reasonably expect to 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 which is an internet platform that businesses are required to use to report all suspicious matters to the New Zealand Police’s Financial Intelligence Unit; and
- Implementation and maintenance of your AML/CFT Programme, which includes:
- Submitting suspicious transaction 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$1,000 or more); and
- Filing an annual report with the relevant AML/CFT supervisor every year by 31 August.
Penalties for non-compliance are severe and can be as high as NZ$ 5 million for businesses and up to $300,000 and two years in prison for an individual. In light of this, it is best to walk on the side of caution and report any 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.