Suspect financial transactions are being scrutinised and then stamped out in New Zealand under its money laundering laws. Here’s why Australian accountants need to take notice.
By Nina Hendy
New laws in New Zealand under its Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Amendment Act 2017 (Phase 2) could impact accountants in Australia, as well as those in other professions.
The changes have been designed to improve the country’s ability to tackle money laundering and terrorism financing, with government figures revealing about NZ$1.35 billion from the proceeds of fraud and illegal drugs is laundered through what many would consider “normal” local businesses every year.
Apart from putting in place practical measures to protect businesses and make it harder for criminals to profit from and fund illegal activities, the changes aim to safeguard and help New Zealand live up to its reputation as one of the world’s least corrupt countries and one of the safest places in which to conduct business.
CPA Australia’s AML reform toolkit
Under the new rules, law firms, banks and financial entities will be obligated to provide the Police Financial Intelligence Unit (PFIU) with information about clients making cash transactions over NZ$10,000 and international monetary wire transfers from New Zealand exceeding NZ$1000.
It also means accounting firms are liable from 1 October 2018 – following a grace period – to report suspicious transactions (Australian accountants have a bit more time to prepare, as the law will not apply until 2019).
Even so, accountants and those in other industries accepting or providing large amounts of cash into or from New Zealand will need to carry out risk assessments, confirm customers’ identities and report suspicious transactions to the PFIU.
Under Phase 2 of AML/CFT legislation, the new laws:
- Cover more businesses (including real estate agents and conveyancers; many lawyers and accountants; some businesses that deal in expensive goods; and betting on sports and various types of racing).
- Make some changes that Phase 1 businesses (including banks, casinos and a range of financial services providers) have had to comply with in the Act since 2013.
Rajesh Chhana, deputy secretary policy at New Zealand Ministry of Justice says that it hopes to minimise the impact on businesses while ensuring anti-money laundering laws [remain] effective.
“Money laundering and terrorist financing are significant problems both here and worldwide,” Chhana acknowledges.
“They allow criminals to hide the proceeds of illegal activities and to fund serious crimes such as drug offending, organised crime, terrorism and tax evasion.”
CPA Q&A. Access a handpicked selection of resources each month and complete a short monthly assessment to earn CPD hours. Exclusively available to CPA Australia members.
What the money laundering rules mean for Australian accountants
New Zealand compliance with money laundering and financial terrorism legislation firm 2Compli co-founder John Parker confirms accountants captured by the legislation due to the products and services they provide will be impacted by the changes.
The extent will depend on the size of the firms, complexity, types of products and services they provide, customers they work with and if they operate a trust account, Parker explains.
“The legislation will have a bigger impact on accountants whose business operates within areas susceptible to money laundering and finance of terrorism,” Parker says.
“This includes any areas that promote anonymity, such as trusts, limited partnerships and charities.”
Australian accountants that refer a client to a New Zealand-based accountant could also be impacted and may need to provide proof of identity.
All accountants need to implement a system to scan and store information, Parker insists. There are several companies that offer an automated onboarding system to manage the process while incorporating due diligence requirements.
“Some accountants may need a customer relationships management (CRM) [system] to store personal information that is easily accessible,” he continues. “Many professionals captured are also taking advantage of working with companies that will manage the due diligence process for them, such as identification verification.
“While this is an additional cost, it ultimately hands off the administrative process and provides peace of mind that the process has been completed consistently.”
There will be costs involved in putting the systems and processes in place, depending on the approach practitioners choose to take, he warns.
"For example, some accountants will write and design their own processes, policy and controls, or might already have CRM in place and (appropriate) accounting software, so the cost will be the two-to-three solid weeks it takes to develop program documents and design processes. Others may choose to engage a consultant, which could cost anywhere between NZ$3000 and NZ$10,000,” Parker says.
The consultation document and more information about New Zealand’s anti-money laundering laws are available here.