- The guidance translates ‘captured activities’ into accounting services to help you work out if your business is an AML ‘reporting entity’
- A revised National Risk Assessment, to help you prepare your own entity risk assessment, has been released
- Guidelines for the reporting of suspicious activities are also being developed
The AML/CFT Act is activity-based. It only imposes obligations on accountants if they provide services, in the ordinary course of business, that are specified under the definition of “designated non-financial business or profession”. These are otherwise referred to in the guidance as “captured activities” and, if provided means your business is an AML reporting entity.
This same rationale extends to those providing captured activities who do not refer to themselves as an “accountant”. They will still be a reporting entity under the AML/CFT Act, but come under the definition of “trust and company service provider” (TCSP) instead. However, if you are a TCSP you will need to comply with the AML/CFT Act from 1 July 2018 rather than 1 October 2018.
The captured activities, as stated in the Act, are purposely high-level, broad and generic in language as they have to apply to multiple sectors. The guidance provides the following examples of accounting services in terms of how the captured activities should be interpreted.
|Captured activities||Accounting services|
|Act as a formation agent of legal persons or legal arrangements||
|Act as, or arrange for a person to act as, a nominee director, nominee shareholder or trustee in relation to legal persons or legal arrangements||
|Provide a registered office address, business address, correspondence address or an administrative address for a legal person or legal arrangement (unless that service is provided solely as an ancillary service to the provision of other services that are not captured activities)||
|Manage client funds (other than sums paid for professional services), accounts, securities, or other assets||
|Engaging in, or giving instructions on behalf of a client to another person for, conveyancing or real estate transactions||
|Engaging in, or giving instructions on behalf of a client to another person for, transactions in relation to buying, transferring or selling OR creating, operating or managing a business, legal person or legal arrangement||
There are a number of other important clarifications made throughout the guidance, including:
- If you are conducting a captured activity in your personal capacity (as opposed to in your professional capacity) that is not captured.
- Advice alone is not captured.
- Auditing and assurance services are not captured.
- If you are loading payments that are then approved by your client, you are not controlling the funds, your client is, so this is not a captured activity.
- If you are authorising payments from your client’s account directly into their staff or suppliers accounts, you are controlling the funds, so this is a captured activity.
Hear directly from the DIA at its roadshows, which will now commence 16 July 2018 and continue through to early August. More information will be available in due course.
Read the guideline
Complying with the Anti-Money Laundering and Countering Financing of Terrorism Act 2009Read more
Other points of clarification
Point 1 - retrospective customer due diligence
A cornerstone of the Act is the performance of customer due diligence (CDD) which involves obtaining and verifying the identity of clients. There is a common misconception that CDD must be performed on all existing clients within a set timeframe after the effective date. However, CDD is only required on an existing client if:
- According to the level of risk involved, there has been a material change in the nature or purpose of the business relationship and you hold insufficient information on that client (section 14(1)(c)); or
- You become aware that they are anonymous (section 14(2)); or
- If you submit a Suspicious Activity Report (SAR) on them (section 22A(2)).
An “existing client” is a client to whom you are providing captured activities prior to 1 October 2018. “Material change” is undefined in the Act but a working supervisory position in regards to EDD is provided in paragraph 12 of the Enhanced Customer Due Diligence Guideline as “an event, activity or situation that you identify during interactions with your client (or via ongoing customer due diligence and account monitoring) that could change their level of ML/TF risk”. All clients (including existing clients) must, according to the level of risk involved, be subject to ‘ongoing account monitoring’ and ‘ongoing customer due diligence’.
‘Ongoing account monitoring’ requires you to regularly review the client’s account activity and transaction behaviour (section 31(4)(a)). This terminology is very much geared towards financial service providers so can be ambiguous. For professional service providers this means observing your clients’ requests, activities and behaviour and remaining alert for red flags and suspicious activities. This assists with determining whether there is a “material change” and the submission of SARs to the New Zealand Police Financial Intelligence Unit (FIU).
‘Ongoing customer due diligence’ requires you to regularly review any information you hold about the client (section 31(4)(b)). This means ensuring any identity information that you do hold on a client is up to date, and if not, obtaining new identity documents to verify any changes. This assists with determining whether insufficient information is held.
Ongoing CDD and account monitoring are important elements of your AML/CFT programme and must have regard to the guidance material produced by the AML/CFT supervisors, for example; AML/CFT Risk Assessment and Programme: Prompts and Notes for DIA reporting entities.
Point 2 – verifying identity of trust beneficiaries
For a client that is a trust you must obtain the name and date of birth of each beneficiary of the trust (section 23(2)(a)). There is a common misconception that this identity information must also be verified. Paragraph 68 of the Enhanced Customer Due Diligence Guideline confirms there is no requirement to verify the name and date of birth of trust beneficiaries.
If there are more than 10 beneficiaries, you can obtain a description of each class or type of beneficiary instead. If the trust is a discretionary trust you must obtain a description of each class or type of beneficiary (section 23(2)(b)(i)). If the trust is a charitable trust you must obtain the objects of that trust (section 23(2)(b)(ii)).
National Risk Assessment
The FIU has published an updated assessment of the money laundering (ML) and terrorism financing (TF) risks that the country faces, called the National Risk Assessment (NRA). This replaces the NRA issued in 2010 and recognises the changes in technology, and the increasing sophistication of methods, in the ML/TF area since then. It is designed to help reporting entities better understand the scale and nature of the ML/TF threats they face in their day to day operations. The major groups of crimes known to generate ML domestically are drugs, fraud and tax evasion. There have been no prosecutions or convictions for TF in New Zealand, therefore the threat here is much lower than many other countries.
The NRA, along with the Phase 2 Sector Risk Assessment (SRA) published by the Department of Internal Affairs (DIA), should both form the basis of each reporting entity’s own risk assessment. This must be in place prior to the effective date of 1 October 2018, as must a compliance officer and AML/CFT programme.
The FIU is also working on guidelines for the reporting of suspicious activities. These guidelines will replace the Suspicious Transaction Guideline 2013. Given that reporting of suspicious activities comes in for Phase 1 reporting entities, and lawyers and conveyancers, on 1 July 2018, we expect the Guideline to be available prior to this date.
The NRA is available here
Browse through the details of the National Risk assessment in full.Read here