AML2 Legislation—What is it? How will it affect me?
This article is intended to answer questions particularly to prepare small to medium sized companies for the legislation.
What and why?
- The New Zealand Parliament introduced the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Amendment Bill (‘AML2’) into Parliament in March 2017. Government intends to pass the Bill in mid-2017.
- The current AML/CFT laws (‘AML1’) have been in place since 2013, applying to banks, casinos and other financial service providers who are required to have a risk assessment programme in place. In practice, this means that these businesses consider how their services could be misused for money laundering and terrorist financing, carry out staff vetting and training, verify the identity of their customers, monitor their transactions and report anything suspicious to the Financial Intelligence Unit of the NZ Police.
- Each year about $1.3 billion from the proceeds of fraud and illegal drugs are laundered through everyday New Zealand businesses. Global and local expectation is to prevent or minimise this harm.
- The NZ Government has proposed these significant reforms to combat such serious crimes. International criminals would be deterred from using New Zealand as a 'soft target' to move their criminal funds, and the measures will introduce more transparency into financial dealings that allow the police to identify criminals and trace their assets—in line with international standards.
- AML2 proposes to extend legal coverage to a range of non-financial sectors including some lawyers, accountants, real estate agents, conveyancers, high value dealers (for example, jewellers and motor vehicle dealers), and the New Zealand Racing Board.
- The Government estimates that it will cost the affected business sectors $0.8 to $1.1 billion over 10 years.
- On the other hand, it estimates that the proposed laws will disrupt about $1.7 billion of illegal drugs and fraud crime over the same period.
What does it mean?
- Businesses may already be familiar with the current AML/CFT requirement. For example, a business opening a bank account will have been asked for identification information on the owners of the business and directors of the company.
- Changes for the targeted businesses will be significant. However, not all businesses in the sectors will be affected. For example,
- Only lawyers and accountants involved in financial services and the establishment and management of trusts and companies will be regulated.
- Real estate agents will be affected when they are involved in the purchase and sale of real estate—this does not include leasing and property management services.
- High-value goods' dealers will only be affected when they deal in large amounts of cash. It is currently proposed that businesses such as jewellers and motor vehicle dealers will only have to comply when they accept over $15,000 in cash—physical currency. Businesses in these sectors deciding not to take such large amounts in cash will not have any obligations.
- Businesses affected by the laws will have to have procedures in place to comply. The laws will set the minimum standards and are risk-based. This means businesses are first required to assess the way in which their services could be misused to launder money or finance terrorism. The Police and the ‘AML/CFT Supervisor’ (proposed to be the Department of Internal Affairs (DIA)) will help businesses to do this.
- Affected businesses will need to develop and implement procedures—an AML/CFT programme—including policies for:
- staff vetting and training,
- verifying the identity of their customers,
- monitoring their transactions,
- reporting anything suspicious to the Financial Intelligence Unit of the Police.
- DIA will provide guidance on how to do this in line with the laws. They anticipate that this guidance will be available for the new sectors before implementation of the new Act (AML2).
- Other businesses may also feel an impact as customers e.g. when a business buys or sells property, the conveyancing firm and the real estate agent will ask for identification documents, including information about the real owners of the business.
What happens next?
- The Government has said it intends to pass the Bill in mid-2017.
- The laws would come into effect in stages over two years to July 2019.
- It is proposed that lawyers and accountants will be drawn in first in 2018, followed by the other sectors in 2019.
- Businesses in the sectors covered should first determine if they are within the scope of the proposed legislation, and if they are, start thinking about implementation. We recommend seeking professional guidance to ensure they are well informed and have time to prepare.
Transparency International New Zealand (TINZ) applauds any effective measures to prevent New Zealand being a soft target for the commission of these serious crimes against peoples here and elsewhere. This legislation will bring us into line with international norms and stop us being seen as a soft touch. TINZ and the writer do not hold themselves as expert in this law and strongly recommend you approach to appropriate professionals.
See Transparency International New Zealand's latest select committee submission (20 April) on the Anti-Money Laundering and Countering Financing of Terrorism Amendment Bill.