Date posted: 15/11/2018 3 min read

New developments in the AML space

Accountants have been in the AML/CFT regime for a couple of months now and the goalposts are still moving.

In Brief

  • On behalf of members, we have applied to the Minister of Justice for an AML class exemption in relation to tax transfers
  • Member firms are now authorised to use the RealMe Identity Verification Service to conduct customer due diligence under the AML/CFT Act
  • The DIA has published a set of Frequently Asked Questions

Update on our application for an AML/CFT Ministerial Exemption (August 2019)

Our application for an exemption for tax transfers is being considered by the Ministry of Justice. We will advise members as soon as we have an outcome we can share.

Application for an AML/CFT Ministerial Exemption

During the AML Roadshow for Accountants in July of this year, the Department of Internal Affairs (DIA) shared its preliminary thinking around tax transfers in the Inland Revenue (IR) system ("myIR"). Initially the DIA saw it as managing client funds and hence a captured activity. At that time we engaged with the DIA to express our concerns that it would bring all tax agents into scope of the AML/CFT Act and that the cost/benefit for the level of risk involved might not equate. We also added it to our FAQ document to communicate the DIA's view more broadly to members.

Then, to formally outline its position, the DIA issued Explanatory Note: Involvement in Tax Transfers, Payments and Refunds. It said tax transfers may be captured activities under the AML/CFT Act as either 'managing client funds' or 'engaging in/giving instructions for a transaction in relation to creating, operating or managing a legal person/arrangement'. Unfortunately, the use of the word "may" did not make the position any clearer.

In our view, the ML/FT risk in tax transfers is very low and as a result, the obligations and hence compliance costs for businesses are disproportionate if they are captured activities. Also we believe the DIA's interpretation in this regard is too far reaching and inconsistent with the intent and purpose of the AML/CFT Act.

On this basis, we are seeking clarification of this position by way of a formal class exemption. We have applied to the Ministry of Justice for an AML/CFT ministerial exemption for all accounting / professional services practices with a tax agency arrangement with IR in relation to tax transfers conducted on behalf of a client.

We have been advised that it can take up to 3—6 months for a decision to be made on whether the exemption be granted. We will report back when the outcome is known.

Exemption application

Our application for a class exemption in respect of tax transfers conducted by tax agents.

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RealMe Identity Verification Service

We advocated to get member firms (Approved Practice Entities) added to the list of "participating agencies" under Regulation 4 of the Electronic Identity Verification Regulations 2013 so they are authorised to use the government's RealMe Identity Verification Service. The Regulations have now been amended to authorise accounting practices where at least one director, partner or principal is a member of CA ANZ and has a Certificate of Public Practice (CPP).

So long as the client has a 'RealMe verified account', accounting practices can now use RealMe for Business to perform customer due diligence (CDD) on that client digitally. Electronic verification removes the need to sight physical evidence of identity and address such as a passport and utility bill or obtain certified copies of such documents. RealMe complies with the Amended Identity Verification Code of Practice (IVCOP) 2013.

There are a couple of ways that businesses can use RealMe for Business:

  • Integration - This comprises the secure linking of your business to the RealMe service. Setting up the RealMe service to work with your business is enabled via a technical development integration project. This is charged on a time and materials basis.
  • Web service - This means that organisations can simply consumeRealMe as a web service via Datacom (who originally developed and now maintain RealMe on behalf of the DIA - the responsible government agency). This comes with an annual fee.

There are no ongoing licence, maintenance, support or Help Desk fees for using RealMe. You can contact business@realme.govt.nzto find out more about using the service.

This is, of course, is entirely optional. You can still take a manual approach to CDD by obtaining originals or certified copies of identity and address documents, or you can use of the many other electronic verification service providers.

Electronic Identity Verification Regulations 2013

See the list of participating agencies, Regulation 4(1)(o) relates to accounting practices.

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Frequently Asked Questions

The DIA has published a set of Frequently Asked Questions (FAQs) on its website. These have been developed based on the queries that it has been receiving from accountants and bookkeepers, as well as lawyers and conveyancers.

These FAQs are split into various topics including compliance officer, types of clients, risk assessment, customer due diligence, prescribed transaction reports, suspicious activity reporting, staff vetting, independent audits and annual reports. There is also a specific section about captured activities and wire transfers for accountants and law firms.

At the moment there are 62 FAQs, but the DIA will be adding to these as other common questions are identified.

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