Date posted: 13/10/2020

CA ANZ to challenge DIA’s interpretation of AML law in court

In its latest step in relation to the anti-money laundering (AML) rules and tax transfers undertaken by tax agents, Chartered Accountants Australia and New Zealand has launched a legal challenge against the Department of Internal Affair’s interpretation of the AML legislation.

In brief

  • CA ANZ launches legal challenge to the treatment of tax transfers as a captured anti-money laundering activity
  • The High Court is asked to rule on a DIA interpretation of the Anti-Money Laundering and Countering Financing of Terrorism Act
  • A court decision will provide certainty for members and has the potential to reduce compliance costs for businesses

Chartered Accountants Australia and New Zealand (CA ANZ) has sought a declaratory judgment on whether tax transfers undertaken by tax agents are a captured anti-money laundering (AML) activity and a judicial review of the Ministerial decision not to grant our application for an exemption for such tax transfers.

CA ANZ has filed a statement of claim against the Attorney General asking the High Court to rule on the two matters. 

A Court decision will give members certainty where currently there is a high degree of uncertainty, said Peter Vial FCA, New Zealand Country Head of CA ANZ.

"The resulting certainty and potential to reduce compliance costs are also in the broader public interest," he said.

"Initiating litigation is a big step, but currently there is uncertainty, frustration and widespread concern among members about the AML Supervisor's interpretation and application of the law and about the compliance costs that result for practices and their clients, including small businesses.

"Regardless of this litigation, to the extent any of their activities are captured by the AML regime, members need to ensure that they continue to meet their AML obligations."

Ministerial Exemption application

In October 2018 CA ANZ applied to the Ministry of Justice for a Ministerial Exemption from the AML/CFT Act in relation to tax transfers performed by tax agents.
The application was in response to the Explanatory Note issued by the DIA on the working day before the AML/CFT Act became effective for accounting practices. It deemed tax transfers "may" be captured activities as either 'managing client funds' or 'engaging in/giving instructions for a transaction in relation to creating, operating or managing a legal person/arrangement'.

The starting point for our exemption application was predicated on tax transfers not being captured and that the exemption was being sought to clarify the uncertainty created by the DIA's statement.

In April 2020 the Government declined CA ANZ's application for an exemption.

That decision, coupled with the inconclusive nature of the DIA's initial guidance, created significant uncertainty about the application of the rules to tax transfers conducted by tax agents.

The CA ANZ Board has approved the initiation of litigation to address the uncertainty in the application of the AML legislation to tax transfers undertaken by CA ANZ members in New Zealand.

We do not anticipate the matter being heard by the High Court before the New Year.

DIA guidance

The Department provides its view on whether activities relating to tax transfers, payments and refunds are captured activities for the purposes of the AML/CFT Act.

Read more

Exemption application declined

The Government declines CA ANZ application for an AML exemption for tax transfers conducted by tax agents.

Read more

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