23rd November 2017
Money laundering is a worldwide problem that has recently been brought into focus in New Zealand. For those who don’t know what this crime is, money laundering is when money received from illegal activities—such as theft, tax evasion, and drug trafficking among others—is passed through a legitimate business to give it the appearance that it was obtained through legal means. Essentially, it is the process of turning 'dirty money' into 'clean money'.
What is the anti-money laundering legislation (AML)?
The new laws extend the current AML/CFT and make some further changes that will affect Phase 1 businesses. The act will cover additional businesses, including lawyers, real estate agents and accountants among others. Banks, casinos and financial service providers who are part of the 'Phase 1' businesses (who’ve had to comply since 2013) will also see some additional changes.
Generally speaking, the new law changes are created to protect New Zealand companies and organisations from the $1.35 billion that is laundered through the country’s businesses each year. As such, these laws will make it increasingly difficult for criminals to profit from illegal activities, and help New Zealand maintain its positive reputation as one of the least corrupt countries in the world—continuing to give it the distinction of a good place for local and international organisations to conduct business.
The law is being implemented in two phases. Many accountants were exempt from Phase 1, which has been in effect for several years. But Phase 2 will soon be underway.
How AML affects accountants
Because criminals who launder money can exploit accountants, accountants may be affected by the anti-money laundering laws, which will come into effect on 1st October 2018. While not all accountants will be affected, those who carry out real estate or other transactions on behalf of a person, manage client funds, act as a formation agent of legal persons or arrangements, and perform other duties will be affected.
To comply with the AML act, accountants will have to do the following:
· Assign a person in their business as the AML/CFT compliance officer.
· Set up an AML/CFT compliance programme that shows how their business will detect and manage the risks of money laundering.
· Document and assess their business’s risk for money laundering.
On an ongoing basis, accountants will have to monitor their customers’ accounts for signs of terrorism financing and money laundering, report suspicious activities or transactions to the FIU, provide a Prescribed Transaction Report if a client wishes to perform a cash transaction of $10,000 or more, review their compliance programme and risk assessment, submit an annual report to the Department of Internal Affairs (DIA), and more.
The DIA will help accountants comply and offer assistance by helping them identify common money laundering red flags and understand how their services can be used by criminals to finance terrorism or launder money.
While this article provides a general overview of some of the new challenges of the AML law facing accountants, it is beyond the scope of this article to cover all aspects of the legislation. Accountancy Insurance encourages you to learn more by referencing this helpful article, which answers many common questions.