Lawyers are at risk of being exploited by criminals to launder money. They’re among several professions whose members may be affected by changes to the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act.
The Supervising Agency for Lawyers and Conveyancers is the Department of Internal Affairs and they have just released guidance to help lawyers and conveyancers build their compliance programmes. The guidance can be found here (external link)
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If you’re a lawyer, you may need to put AML/CFT measures in place.
This will help prevent money laundering, make it easier for authorities to find out where ‘dirty’ money came from, prosecute criminals, seize illegally earned money and assets, and stop crime and terrorism.
Here’s a summary of the proposed changes.
From 1 July 2018, you’ll need to comply with the AML/CFT Act if you are carry out the following activities in the ordinary course of business.
acting as a formation agent of legal persons or legal arrangements
acting as, or arranging for a person to act as, a nominee director or nominee shareholder or trustee in relation to legal persons or legal arrangements
providing a registered office or a business address, a correspondence address, or an administrative address for a company, or a partnership, or any other legal person or arrangement (unless it's solely for a service which isn't covered by the Act)
managing client funds, accounts, securities, or other assets
providing conveyancing services (either yourself, or when you give instructions to someone else) to carry out a real estate transaction. “Conveyancing” is defined in section 6 of the Lawyers and Conveyancers Act 2006 (external link) , and “transaction” is defined in section 4 of the Real Estate Agents Act 2008 (external link) .
providing services (either yourself, or when you give instructions to someone else) to:
Whether an activity is in your “ordinary course of business” will depend on your particular business. It’s ultimately a question of judgment, which takes into account certain factors.
For most businesses, it will be obvious if an activity is in your ordinary course of business.
If you’re unsure, consider things such as whether the activity is something you do frequently or regularly; involves significant allocation of resources; or is related to a service or product that’s offered to customers.
For more information see the In the ordinary course of business guidelines (external link) .
If you provide any of the services outlined above, you’ll have to comply from 1 July 2018.
To get ready, you’ll need to take a number of steps beforehand. For more information, see “What do I have to do to comply with the AML/CFT Act?”
Services provided by lawyers are often used by criminals to hold and move assets and funds anonymously.
Introducing AML/CFT measures will deter criminals from using your services and help detect them if they do.
Importantly, it will also strengthen the overall AML/CFT system. For example, a lawyer may detect ‘red flags’ that might not be picked up by banks or other financial service providers who interact with the same customers. That’s because you may have more information about the people or funds involved in a particular transaction.
The greater the AML/CFT risks your business faces, the more you’ll have to do to manage these risks. A small firm with long-term local clients may have fewer risks than a large firm with clients around the world.
Initially, you’ll have to:
On an ongoing basis, you’ll have to:
Legal professional privilege will continue to apply, except when the lawyer reasonably believes the information is for a dishonest purpose or to aid or commit a crime. Information kept in relation to lawyers’ trust accounts will not be privileged.
For information about ways to reduce compliance costs, see: Working with others to reduce your AML/CFT compliance costs
The Department of Internal Affairs (DIA) will supervise lawyers, as well as other professions and businesses that Phase 2 of the Act applies to. DIA will help you comply with the law and enforce it when needed. Some of the things DIA will do include:
A range of existing guidance material is already available to help get you started. Now the Bill has been passed, we plan to engage with sectors to develop regulations, which will provide more clarity, and produce more guidance material. For more information, see: AML/CFT supervision and support for businesses