The Department of Internal Affairs

The Department of Internal Affairs

Te Tari Taiwhenua

Building a safe, prosperous and respected nation

 

Services › Anti-Money Laundering › Wire transfer provisions for informal or hawala money remitters

Thumbnail image of the information sheetWhen informal or hawala arrangements are used to remit money, the funds are transferred outside of formal banking channels.

The Department of Internal Affairs is aware that there is some confusion amongst money remitters that use informal or hawala money arrangements as to how the wire transfer provisions apply to them.

The following information sheet and flow chart is designed to help you work out how the enhanced customer due diligence (CDD) wire transfer provisions apply to you.

Download the information sheet and flow chartPDF, 3 pages, 186KB

You can also access an HTML version of this information:

Frequently asked questions

  • What are the wire transfer provisions for?
  • Why do the wire transfer provisions apply to informal or hawala arrangements?
  • Am I an 'Ordering Institution?
Flow chart and additional information
  • What must I do as an Ordering Institution?
  • What must I do as a Beneficiary Institution?
  • What must I do as an Intermediary Institution?

Frequently asked questions

These are some of the frequently asked questions:

What are the wire transfer provisions for?

The wire transfer provisions are additional enhanced customer due diligence (CDD) requirements
[1]. They are applied and relate specifically to the information that must accompany a transfer of funds by electronic means [2].

Cash and people and arrow iconsThese transfers present a high risk of money laundering which is why these additional enhanced CDD requirements exist.

The wire transfer provisions do not replace the normal obligations on a money remitter to identify their customer in accordance with the requirements of the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act 2009.

This includes obligations to also identify any person acting on behalf of the customer, or any person that has effective control or ownership of them. Depending on the circumstances, this may involve a standard or an enhanced level of customer due diligence.

[1] Prescribed by s22(3), s27 and 28 of the AML/CFT Act.
[2] Defined in s5 of the AML/CFT Act.

Why do the wire transfer provisions apply to informal or hawala arrangements?

The wire transfer provisions apply to any type of funds transfer if three key elements occur:
  • the transfer is from one financial institution to another financial institution.
  • the transfer is on behalf of a person (who may or may not be the same person as the beneficiary).
  • the transfer occurs by electronic means.
In addition to remittance through the formal banking system, the wire transfer provisions, which are for transactions over $1000 [3], apply to transfers using internet based platforms.

The wire transfer provisions also apply to transfers using informal or hawala arrangements, where email or any other form of online, or phone, or digital messaging is used to send the payment instructions.

[3] Regulation 5A and 13A – AML/CFT (Definitions) Regulations 2011.

Am I an ‘Ordering Institution’?

If you are the first money remitter involved in receiving the funds from the person that is sending them, together with an authority or instruction to transfer them to the beneficiary, you are the Ordering Institution [4][4]. The funds received by you could be in cash, cheque, or through an online transfer into a bank account that you are using for your remittance business.


The funds received could be in New Zealand for an outbound money transfer. Or if the transfer is inbound to New Zealand, the funds received could be to a bank account that you hold in another country, or to the account of an associate who has agreed to assist you process a transaction.

Ultimately, where you are the money remitter that is receiving funds and initiating and directing their transfer towards their intended beneficiary, you are the Ordering Institution for the purposes of that wire transfer transaction.

[4] Defined in s5 of the AML/CFT Act.

Flow chart

Follow this flow chart to work out how the enhanced customer due diligence (CDD) wire transfer provisions apply to you:


Flow chart explaining how the wire transfer provisions apply to you

Larger version of image Long description

What must I do as an Ordering Institution? [5]

You must obtain the full name of the person that has provided you with the funds, their account number if available, and either their place and date of birth, their address, national identity number or customer identification number.


This information must be verified from information or documents from a reliable and independent source. You must obtain, but do not have to verify, the name and any account or unique identifier for the intended beneficiary of the funds.

If it is an international money transfer, you must send all of the information that you have obtained to the next financial institution in the chain as part of your payment instructions. Where you are making a payment to a beneficiary’s account at a bank, this information must be included in the appropriate fields you complete for the online transfer. For payments made to another money remitter, this information must be included in your electronic messaging to them.

What does this mean in practice?

If you are an Ordering Institution transferring funds
out of New Zealand, the customer that you need to identify will often be the same person that is providing you with the funds. In practice, this means that you will not normally need to undertake any additional identification or verification to meet the wire transfer provisions of the AML/CFT Act. You will just need to ensure that the information you have obtained accompanies your payment instructions to the next financial institution.

However, if you are an Ordering Institution transferring funds in to New Zealand, the customer that you need to identify may not be the same person that is sending the funds. In fact, your customer in New Zealand is more likely to be the beneficiary. Examples of this would include a student receiving money from their parents to support their studies, or a New Zealand supplier receiving funds to purchase products they are exporting. In these situations, and in addition to identifying your customer here, you are required to conduct CDD under the wire transfer provisions in relation to the person overseas that is sending the funds.

What if I am only involved in paying out the funds?

If you have had no involvement in receiving the funds initially, and are solely instructed by another remitter to make a payment to a beneficiary, you will still have obligations under the wire transfer provisions of the AML/CFT Act.


If you pay out funds to the beneficiary by cash or cheque, then you are the last financial institution in the transaction chain. This makes you the Beneficiary Institution [6] for the purpose of that transaction.

However, if you pay out the funds by online transfer to an account that the beneficiary holds with their bank, this makes you an Intermediary Institution [7]. The bank then becomes the Beneficiary Institution for the purpose of this transaction. There are other instances where you could also be an Intermediary Institution. For example, this could occur if you are asked by one money remitter to provide funds in another country to a third money remitter to assist the pay out to a beneficiary.

[5] Prescribed by s27(1)-(4) and 28 of the AML/CFT Act.
[6] Defined in s5 of the AML/CFT Act.
[7] Defined in s5 of the AML/CFT Act.

What must I do as a Beneficiary Institution? [9]

If you receive a transfer that is not accompanied by the required information, you must determine whether to execute, reject or suspend the payment.


You may decide to request further information from the Ordering Institution, and you must consider whether you should file a suspicious transaction report.

If you receive a wire transfer for a person that you do not have a business relationship with, there is an additional requirement that you must comply with [8]. You must identify the person that is receiving the money. This might occur if you are paying the person out in cash or cheque and have never dealt with them previously. In these situations, and before you release the funds, you must identify this person and conduct standard or enhanced CDD as is necessary.

[8] Regulation 13A – AML/CFT (Definitions) Regulations 2011.
[9] Prescribed by s27(5) of the AML/CFT Act.

What must I do as an Intermediary Institution? [10]

In a transfer of funds, you are only required to ensure that all information you receive from the Ordering Institution is passed on to another Intermediary, or to the Beneficiary Institution.


If you are paying funds by online transfer to the bank account of the beneficiary, you must include this information in your online transfer information.

Or, if you are asked by one money remitter to provide funds in another country to a third money remitter, you must include this information in your electronic instructions to the third money remitter.

[10] Prescribed by s27(6) of the AML/CFT Act.