Understanding Anti-Money Laundering (AML)

The concept of AML has been around as early as 2013. However, the Anti-Money Laundering and Countering Financing of Terrorism Act (AML CFT) previously only impacted those in banking or other financial services industries. The recent changes in legislation have brought the subject front of mind for other New Zealand industries such as legal firms, accounting practices, and real estate agencies. In this guide, we discuss the impact AML CFT has on someone who engages with these service providers.

In the guide:

An overview of AML CFT

Definition of Beneficial Owner and a Person Acting on Behalf of a Customer

Limited Customer Due Diligence for Tax Pooling

Current version available for download: November 2020

Preview: About this Guide

AML. No three letters have in recent times caused a ripple throughout several industries in New Zealand quite like these three letters.

For those unaware of what the abbreviation AML stands for, it means anti-money laundering. Indeed, AML has become quite the hot topic in recent years amongst legal firms, accounting practices and real estate agencies. For those working in banking and other financial services providers, this has been part of their vernacular since 2013.

The Anti-Money Laundering and Countering Financing of Terrorism 2009 Act (AML CFT) was implemented to:

  1. Detect and deter money laundering and terrorism financing
  2. Enhance and maintain New Zealand’s international reputation by following the advice of the Financial Action Task Force
  3. Instill public confidence in the New Zealand financial system

But how does this impact you as someone who engages with these service providers?

While there are screeds of resources available online, much of it is not written in plain English or focuses on the requirements a business obligated to conduct AML must meet as part of their compliance and risk assessment programme. Very few resources look at AML from the perspective of a customer or a client of said business.

That’s why Tax Management NZ has produced this guide on anti-money laundering in NZ.

We have been conducting AML on our clients for quite some time now, so we know how AML will affect the way you transact with banks, legal firms, accounting practices, real estate agencies and anyone else captured by this legislation.

We do not profess to be experts in this field – tax pooling and provisional tax are our speciality – and this is not intended to be a definitive document. It can’t be, especially as every industry will have regulatory requirements that are specific to them and everyone’s situation is different.

Our goal is to simply provide a basic overview of the NZ anti-money laundering act and what it means for you.

That way you won’t be wearing a perplexed look on your face when someone with whom you are transacting utters those three letters.

As always, we hope you enjoy the read and learn something new.

Disclaimer: This guide is for those living and doing business in New Zealand. It is not a replacement for information in the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML CFT Act) or any other related provisions. It is for general information only and is not a substitute for independent, professional legal advice. It should not be used by entities captured under the AML CFT Act as a basis to put together their anti-money laundering and countering compliance and risk assessment programme.

An Overview of AML

The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML-CFT) requires the likes of New Zealand financial institutions, accounting firms, lawyers, conveyancers, real estate agents, casinos, high-value asset dealers, trust and company service providers, and tax pooling intermediaries to take measures to detect, report and deter money laundering and terrorism financing.

The AML CFT Act ensures New Zealand businesses take appropriate action to protect themselves against money laundering and terrorism financing – designed to make it harder for criminals to profit from and fund illegal activity. The AML-CFT aims to also safeguard New Zealand’s reputation as being one of the world’s least corrupt countries and a good place to do business.

As part of the Anti-Money Laundering Countering Financing of Terrorism Act, certain entities are required to know their customers and ask questions about their transactions before they can carry out their requests.

Some examples of where this applies includes when someone is:

  • Buying or selling property, land, a business or shares
  • Opening a bank account
  • Appointing an accountant or lawyer to carry out business activities on their behalf
  • Sending, receiving or transferring money above a certain threshold from an account
  • Setting up a company, trust or other legal entity.

Three regulators – the Reserve Bank of New Zealand, Financial Markets Authority and The Department of Internal Affairs – monitor the entities captured by the AML-CFT to ensure they are complying with their AML-CFT obligations.

New Zealand is among a host of OECD countries that have an AML-CFT framework in place.

It is part of an international obligation to detect suspicious activity, money laundering and terrorism financing, and criminals abusing the financial system.

How this impacts YOU

Following the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 means you will need to supply information that verifies who you say you are when carrying out certain transactions or entering a business relationship with a reporting entity captured by the AML-CFT Act.

You will be asked to supply information that confirms your identity if you are:

  • A customer (e.g. an individual person, company or trust)
  • A beneficial owner of a customer
  • A person acting on behalf of a customer.

You may also need to supply evidence that supports how the customer obtained their source of wealth and/or fund financing.

This process – known as customer due diligence – applies to both a new and existing customer. An entity captured under the Anti-Money Laundering and Countering of Terrorism Financing Act in New Zealand also has an obligation to regularly check and review any information it holds in relation to the customer.

This means they will ask you to notify them if any details about you as a customer, beneficial owner of a customer or person acting on behalf of a customer changes. You will have to provide proof of identity for any new person who is now a beneficial owner or acting on behalf of a customer as part of this process.

Failure to supply the necessary information when required means the services or transactions you are requesting CANNOT be completed.

Providing the information

Any documentation must be provided before a reporting entity captured by the AML-CFT Act can legally do business with you in New Zealand.

There are three ways you can do this.

The most common is to meet in person with the reporting entity so someone at that entity can sight the original document(s) at the same time to ensure they are legitimate.

If you are unable to meet face-to-face with the reporting entity, you have the option of using a trusted referee to verify your identity and identity documentation you are going to supply. We explain more about what this process involves later in this guide and include a list of people who are considered trusted referees.

You may also be able to get your identity information verified electronically if a reporting entity you are dealing with uses credit check tools or real-time verification services such as RealMe.

Each entity will have its own process around collecting and verifying this information in order to comply with the Anti-Money Laundering and Countering Financing of Terrorism Act. It pays to check with them if you are unsure or have any questions.