Date posted: 13/02/2018 5 min read

An AML status check

The ‘final push’ before Christmas saw a number of developments

In brief

  • Sector Risk Assessment gives the accounting profession a medium to high risk rating for money laundering
  • Regulations that affect accountants have been finalised
  • AML Advisory Group review and provide feedback on draft guidance for accountants

According to the Phase 2 AML/CFT Sector Risk Assessment (SRA) recently released by the Department of Internal Affairs (DIA), there is a medium-high risk of money laundering (ML) and terrorism financing (TF) occurring within the accounting profession. This is consistent with international experience and expectations.

The accounting profession is vulnerable to a number of ML/TF factors. These factors may present an attractive avenue for ML/TF. The SRA rating reflects this, in combination with the large size of the sector, its “gatekeeper” role, and its provision of a variety of services. It is also important to note that this is an assessment of risk before controls (i.e. inherent risk), it does not assess the risk after controls are considered (i.e. residual risk).

The SRA along with the National Risk Assessment (NRA), which is pending release, will form the basis of each reporting entity’s individual Risk Assessment. They are designed to assist reporting entities by providing guidance on the specific risks and vulnerabilities relevant to their business.

“The consequences of such vulnerabilities can be wide-ranging and result in significant financial and reputational impact” says the DIA report.

Sector Risk Assessment

Understand the risks and vulnerabilities facing accountants

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Regulations

Last October the Ministry of Justice consulted on the first tranche of draft AML/CFT regulations. These have now been approved and include the annual report form and suspicious activity report (SAR) requirements.

Our submission focused on whether the questions in each of these made sense in the context of the accounting profession (as they have to apply across multiple sectors), and whether the data being requested would ordinarily be captured. We recommend you review the regulations to ensure your current systems and processes can accommodate these requirements.

We have provided input into a user guide to help reporting entities complete the annual report form. This is due to be published on 29 March.

We do not expect any further tranches of regulations to effect the accounting profession. We understand there will be one more consultation in April/May 2018 on draft regulations specific to real estate agents and the New Zealand Racing Board.

Reporting requirements

Schedule 1 contains the SAR, and Schedule 2A the annual report

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AML Advisory Group

The AML Advisory Group established by the government held a third workshop this month at which officials presented the draft guidance for accountants.

The guidance for lawyers and conveyancers has already been published because they are the first to be covered under the amendment to the AML/CFT Act. Now the DIA is turning its attention to the guidance for accountants. Accountants must comply with the AML/CFT Act from 1 October 2018.

The guidance clarifies how the DIA interpret certain aspects of the legislation in the context of the accounting profession. To help accounting practices determine if they are in scope of the AML/CFT Act, it provides examples of the kinds of services that accountants provide for each activity in the definition of “designated non-financial business or profession”. The guidance is due to be released on 29 March, but in the interim we recommend you look at the lawyers and conveyancers guidance.

Guideline: Lawyers and Conveyancers

The guidance for accountants will be very similar

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Guidance

You are still able to register for the final AML webinar in our complementary three part series. Upon registration you will get a recording of the previous two webinars in the series. In part three Kate Reid; the Director of Phase 2 Implementation at DIA, will present on the guidance for accountants.

DIA has also published 'Prompts and Notes' Guidance. This provides accountants and other professions with a series of questions and suggested best practice to help guide the development of a reporting entity's individual Risk Assessment and AML/CFT Programme. These two key documents must be developed prior to 1 October 2018.

Prompts and notes

Develop your Risk Assessment and AML/CFT Programme

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