Lawyers and accountants and AML/CFT

Lawyers and accountants are at risk of being exploited by criminals to launder money. They’re among several professions whose members may be affected by proposed changes to the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act.

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If you’re a lawyer or accountant, you may need to put AML/CFT measures in place once ‘Phase 2’ of the Act comes into effect.

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.

Here’s a summary of the proposed changes.

Will I have to comply with the AML/CFT Act?

You’ll need to comply with the AML/CFT Act if you:

  • acting as a formation agent of legal persons or 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 arrangements
  • providing a registered office or a business address, a correspondence address, or an administrative address for a company, 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
  • engaging in or giving instructions in relation to any conveyancing (with the meaning of section 6 of the Lawyers and Conveyancers Act 2006) on behalf of a customer in relation to the sale or purchase, or the proposed sale or purchase, of real estate
  • engaging in or giving instructions in relation to transactions on behalf of any person in relation to the buying, transferring or selling of real estate, businesses or legal persons; or for creating, operating, and managing legal persons and other legal arrangements.

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Why will the AML/CFT Act apply to businesses who provide these services?

Services provided by lawyers and accountants 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, lawyers and accountants may detect ‘red flags’ that banks and other financial service providers who interact with the same customers might not pick up, because you may have more information about the people involved and how they arrange their affairs.

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How much work will be involved?

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 will likely have fewer obligations under the AML/CFT Act than a large firm with clients around the world.

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What will I have to do to comply with the AML/CFT Act?

Initially, you’ll have to:

  • designate someone in your business as an AML/CFT compliance officer
  • assess and document the money laundering and terrorist financing risks your business may face
  • establish an AML/CFT compliance programme setting out how you’ll detect and manage these risks.

On an ongoing basis, you’ll have to:

  • verify the identity of new customers before providing any service covered by the AML/CFT Act (see question 1 above). In some circumstances (such as if they represent a company or trust), you may also need to ask for information about where money came from and the other people involved. For more information about verifying customers’ identities, see:
    Information for customers about AML/CFT laws
  • submit a Prescribed Transaction Report to the Police Financial Intelligence Unit (FIU) if a client wants to conduct a transaction in cash that is more than $10,000
  • monitor all customers’ accounts to identify potential warning signs of money laundering and terrorist financing. You must report any suspicious transactions or activity to the FIU. For more information, see:
    Reporting suspicious activities
  • regularly review your risk assessment and compliance programme
  • have your risk assessment and compliance programme audited every 2 years
  • submit an annual report to the Department of Internal Affairs, which will supervise your sector.

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.

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What could I do to reduce my compliance costs?

For information about ways to reduce compliance costs, see:

Working with others to reduce your AML/CFT compliance costs

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What help and oversight will be available?

It’s proposed that the Department of Internal Affairs (DIA) will supervise lawyers, as well as other sectors that Phase 2 of the Act will apply to. It will help you comply with the law and enforce it when needed. Some of the things DIA will do include:

  • helping you understand how criminals could use your services to launder money or finance terrorism
  • providing support and guidance to help you identify money laundering ‘red flags’ and to comply with AML/CFT laws
  • investigating and taking action if you don’t meet your obligations.

For more information, see:

AML/CFT supervision and support for businesses

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When will I need to start complying with the AML/CFT Act?

The Government intends to pass the law around the middle of 2017.

After that, businesses will have a period of time to prepare for the changes. It’s proposed that lawyers and conveyancers will have to comply 12 months after Parliament passes the Bill. Accountants will have to comply 15 months after it’s passed.

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