Anti-money laundering legislation

Understand how rules around anti money laundering (AML) and counter terrorism financing (CTF) apply to you.

In Brief

  • The Anti-Money Laundering and Counter Terrorism Financing (AML/CTF) regime seeks to help instill public confidence in our financial systems, both here and overseas
  • Australia and New Zealand are members of the Financial Action Task Force (FATF) and the Asia/Pacific Group on Money Laundering (APG)
  • There are different requirements for members between Australia and New Zealand, as implementation is currently at different stages

Money laundering is a process where 'dirty money' received from criminal activities, such as misuse of drugs, theft and tax evasion, is passed through legitimate businesses and turned into 'clean money'. It is a significant problem, both here and worldwide.

Anti-money laundering and counter-terrorism financing legislation is being implemented in New Zealand and Australia in two phases. 

Phase 1 is in effect in both countries and applies to banks, casinos and a range of financial service providers. 

Phase 2 is in effect in New Zealand, and brings the accounting profession into the regime.

Regime overviews

  • New Zealand – application to accountants in Phase 2

    Scope

    A reporting entity is an accounting practice that, in the ordinary course of business, carries out one or more of the activities described in the definition of "designated non-financial business or profession" in section 5(1) of the Act.

    Obligations

    • Appoint a Compliance Officer to administer and maintain the AML/CFT programme
    • Produce a written risk assessment that addresses the risks the reporting entity may reasonably expect to face
    • Establish a written AML/CFT programme based on the risk assessment containing internal procedures, policies and controls to address AML/CFT risk
    • Perform customer due diligence (CDD) including verifying customer identity
    • Report suspicious activities to the New Zealand Police's Financial Intelligence Unit (FIU)
    • Report prescribed transactions (domestic cash transactions of $10,000 or more and international wire transfers of $1,000 or more) to the New Zealand Police’s Financial Intelligence Unit (FIU)
    • Submit an annual report to the AML/CFT supervisor
    • Obtain an assurance engagement over the risk assessment and AML/CFT programme every two years.

    Supervision

    New Zealand follows a multi-agency supervision model.

    • The Reserve Bank (RBNZ) - banks, life insurers, and non-bank deposit takers
    • The Financial Markets Authority (FMA) - securities, trustee corporations, futures dealers, collective investment schemes, brokers and financial advisers
    • The Department of Internal Affairs (DIA) - all Phase 2 reporting entities (accountants, lawyers, real estate agents, conveyancers, high-value dealers and the NZ Racing Board), casinos, money changers, trust and company service providers, and other reporting entities not covered by the RBNZ or the FMA.

    Penalties

    A reporting entity that commits an offence under the Act is liable, if convicted, to a fine of up to $5 million.

    An individual who commits an offence under the Act is liable, if convicted, to up to two years imprisonment and a fine of up to $300,000.

  • Australia – application to tranche 1 reporting entities

    Scope

    A reporting entity is a business which provides designated services. The definition of a designated service is outlined in Tables 1 to 3 in Section 6 of the Act. Phase 1 of the regime is aimed at financial institutions. Accounting services aren’t generally considered a designated services.

    Obligations

    • A new customer must be identified before providing a designated service. 
    • An AML/CTF program must be implemented which identifies, mitigates and manages the money laundering and/or terrorism financing risks. This usually includes: 
      • An assessment of the risks associated with the services being provided, taking account of the customers and their jurisdictions
      • An AML/CTF risk awareness training program 
      • An employee due diligence program 
      • Documentation of the AML/CTF program and approval by the CEO or Board
      • A nominated AML/CTF Compliance Officer
      • Regular independent reviews of the AML/CTF program by an independent external or internal party
      • Appropriate customer identification procedures. 
    • An annual Compliance Report must be submitted to the supervisor
    • Any suspicious matters must be reported to the supervisor.

    Supervision

    Australia has a single national regulator; the Australian Transaction Reports and Analysis Centre (AUSTRAC) who also performs the Police body role with suspicious matter reports.

    Penalties

    Failure to comply under the Act carry civil penalties of up to $4.2 million for an individual and $21 million for a reporting entity.

     

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