The Department of Internal Affairs

The Department of Internal Affairs

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Services › Anti-Money Laundering › Codes of Practice and Guidelines

(29 June 2018) Lawyers and simplified customer due diligence (CDD) and registered banks

The Department of Internal Affairs (DIA), an AML/CFT supervisor, is aware that law firms seek clarification how to meet their CDD obligations relating to their existing business relationships with registered banks.

DIA hold the interim view that the “existing customer” provisions as defined in the Act are sufficient for this purpose. This is despite a registered bank ordinarily being a type of customer that may be eligible for simplified CDD (sections 18-20 of the Act).

An existing customer means a person who was in a business relationship with the law firm immediately before 1 July 2018. A law firm is not required to conduct CDD on an existing customer unless there has been a material change in the nature or purpose of the business relationship and it holds insufficient information about that customer (section 14(1)(c) of the Act). This means in relation to a registered bank that is an existing customer, in most cases, a law firm does not need to conduct any further CDD on the registered bank or on a person acting on its behalf.

Example: On 1 July 2018, a lawyer acts for New Zealand registered ‘Bank A’ on registration of a mortgage on a property that is being purchased. If the lawyer has not acted for Bank A in this capacity previously, the law firm may conduct simplified CDD on Bank A. However, if the law firm has an existing relationship with Bank A prior to 1 July 2018, Bank A is an existing customer. Unless there is a material change in the nature or purpose of the services provided and insufficient information about Bank A, the law firm is unlikely to need to conduct any additional CDD.

Please note that for any new business relationship with a registered bank, a law firm may conduct simplified CDD in accordance with section 18-20 of the Act. This means in relation to a registered bank, the law firm may conduct simplified CDD on the bank and the person acting on its behalf. As with most aspects of the AML/CFT Act, a law firms’ compliance measures should apply a risk-based approach.

DIA will provide further guidance in relation to this issue as we develop our understanding of the relationships between law firms and registered banks.

(28 June 2018) August timeframe for publication of Guidance for Real Estate Agents

The Department of Internal Affairs will be delaying the publication of the guideline ‘Real Estate Agents – Complying with the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act)’. This is in order to incorporate new regulations currently being consulted on and drafted by the Ministry of Justice (see:
AML/CFT regulations: Tranche 2 consultation)

While the new regulations are small in number they are important and will have an impact on how real estate agents meet their AML/CFT obligations. Rather than having ‘before and after’ versions of the guideline which may result in some confusion DIA have decided to wait until the new regulations have been published online (gazetted) before the guideline is released. This is anticipated to be at the beginning of August 2018. This still provides plenty of time for real estate agents to access the guideline before they are covered by the AML/CFT Act on January 1 2019.

In the meantime DIA suggests that real estate agents make themselves familiar with the following existing guidance which will help them prepare for the AML/CFT Act:
The Department remains committed to producing high quality guidance material for their reporting entities and helping them meet their AML/CFT obligations.

If you require further discussion/clarification, please feel free to contact us at amlcft@dia.govt.nz

These documents will be reviewed regularly:

AML Roadshow for Accountants

The Department of Internal Affairs (DIA) is hosting a series of 2-hour roadshows throughout the country this July, 2018. These sessions are focussed on the Anti-Money Laundering and Countering Financing of Terrorism Act. Attendance is free for accountants, tax agents, bookkeepers and anyone engaged in providing professional accounting services.

The Financial Intelligence Unit from NZ Police will also be available to provide some context around the reporting and law enforcement aspect of AML/CFT.

Each session will begin with tea and coffee and a light snack, so please allow enough time for this before the session begins.

Accountants Guideline

This guide is designed to help accountants, and any other business that conducts activities that are described in the definition of “designated non-financial business or profession”, to develop awareness of money laundering and terrorism financing and build their compliance programmes to meet their obligations under the AML/CFT Act.

Phase 2 User Guide: Annual AML/CFT Report by DNFBPs

The annual report is a requirement under section 60 of The AML/CFT Act. This User Guide for Annual AML/CFT Reports for DNFBPs is designed to help reporting entities who fall under the definition of “designated non-financial business or profession” to complete their annual reports. The form annual report is prescribed in the Anti-Money Laundering and Countering Financing of Terrorism (Requirements and Compliance) Amendment Regulations 2017 – see schedule 2A. The first annual report is due to be submitted to DIA by 31 August 2019.

Lawyers and Conveyancers Guideline

This guide is designed to help lawyers and conveyancers develop awareness of money laundering and terrorism financing and build their compliance programmes to meet their obligations under the AML/CFT Act.

Enhanced Customer Due Diligence Guideline

This guideline assists you to conduct enhanced customer due diligence (EDD) on your customers under the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act 2009 (the Act).

Phase 1 User Guide: Annual AML/CFT Report

The annual report is a requirement under section 60 of New Zealand's Anti-Money Laundering and Countering Financing of Terrorism Act 2009. The User Guide: AML/CFT Report is designed to help reporting entities complete their annual reports. The form and content of the annual report is prescribed in
the Anti-Money Laundering and Countering Financing of Terrorism (Requirements and Compliance) Amendment Regulations 2017 – see schedule 2.
This user guide is used primarily to support Phase 1 reporting entities; i.e. financial institutions and casinos. Please note, trust and company service providers who have been using this report form should switch to using the DNFBP annual report form to cover the reporting period 30 June 2018 – 1 July 2019 onwards.

Identity Verification Code of Practice

Amended Identity Verification Code of Practice 2013

On 10 October 2013 an Amended Identity Verification Code of Practice was gazetted under section 64 of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act). The amendments come into force on 1 November 2013.

Explanatory Note (updated December 2017)

The Explanatory Note clarifies requirements for electronic identity verification in accordance with the Amended Identity Verification Code of Practice 2013.
This December 2017 update replaces the previous version published in 2013.

Key changes to the Code of Practice (2013 Amendments)

Part 1: Documentary Identity Verification
  • Adjustment to the national identity card information to recognise some countries don’t use signatures but may use other biometric measure.
Part 2: Document Certification
  • Inclusion of international certification requirements
  • Clarification that a trusted referee cannot be a person involved in the actual business/financial transaction requiring the certification
Part 3: Electronic Identity Verification
  • Inclusion of a description of electronic identity and the subsequent verification
  • Inclusion of the ability to rely on a single independent electronic source of verification when that source establishes a high level of confidence
  • Removal of reference to address as identity verification. NB. This does not detract from the use of address as a key element of customer due diligence.

Identity Verification Code of Practice 2011

On 1 September 2011 the Identity Verification Code of Practice 2011 was gazetted. The code came into full force on 30 June 2013. This code of practice will help reporting entities verify the name and date of birth of customers (that are natural persons) they have assessed as low to medium risk.
This code covers documentary identity verification, document certification and electronic identity verification.

Reporting entities may use this code to comply with customer due diligence requirements as required by the following sections of the AML/CFT Act:
  • Section 16 – standard customer due diligence: verification of identity requirements
  • Section 20 – simplified customer due diligence: verification of identity requirements
  • Section 24 – enhanced customer due diligence: verification of identity requirements
  • Section 28 – wire transfers: verification of identity requirements.
Complying with a code of practice is not mandatory, although it constitutes a safe harbour. If a reporting entity fully complies with the code it is deemed to be compliant with the relevant parts of the AML/CFT Act. If a reporting entity opts not to comply, it must notify its supervisor that it is opting out and adopt practices that are equally effective, otherwise it risks non-compliance.

The Identity Verification Code of Practice was replaced by the Amended Identity Verification Code of Practice 2013 (above).

Wire Transfers

This guideline is designed to help reporting entities understand the definition of wire transfer under the AML/CFT Act and sets out the minimum requirements for parties to a wire transfer.

Territorial Scope of the AML/CFT Act 2009

This guideline is designed to help reporting entities understand the territorial scope of the AML/CFT Act and assist them to determine whether they have obligations under the Act.

Beneficial Ownership Guideline

A key task in meeting the requirements of the AML/CFT Act is to identify and verify customers’ beneficial ownership arrangements. This guideline is to assist reporting entities in meeting the requirement to perform customer due diligence on the customer and beneficial owners of the customer.

Customer Due Diligence Fact Sheets

These fact sheets are designed to help reporting entities understand the identification and verification requirements for different types of customers. The fact sheets should be read in conjunction with the beneficial ownership guideline.

Guideline for Audits of Risk Assessments and AML/CFT Programmes

This guideline is designed to help reporting entities with the requirement to audit their AML/CFT risk assessment and AML/CFT programme. The guideline provides an overview of the what to consider when arranging and carrying out the audit.

Countries Assessment Guideline

This guideline is designed to help reporting entities decide when an assessment of another country's AML/CFT regulatory environment is required, and provides guidance on how to undertake this assessment.

Designated Business Groups Guidelines

Designated Business Group - Scope Guideline (updated December 2017)

This guideline is designed to assist reporting entities to understand which obligations may be shared by members of a designated business group.
This December 2017 update replaces the previous version published in 2012.

Designated Business Group - Formation Guideline (updated December 2017)

This guideline is designed to help reporting entities understand the process for forming a Designated Business Group. This guideline also explains the process for notifying an AML/CFT supervisor about the formation of, or change to, a designated business group and provides the forms for doing so.
This December 2017 update replaces the previous version published in 2012.

Risk Assessment Guideline - Updated May 2018

The AML/CFT Risk Assessment Guideline is designed to help reporting entities conduct a risk assessment, as required under section 58 of the AML/CFT Act.
A risk assessment is the first step a business must take before developing an AML/CFT programme. It involves identifying and assessing the risks the reporting entity reasonably expects to face from money laundering and terrorism financing. Once a risk assessment is completed, a reporting entity must then put in place an AML/CFT programme that manages and mitigates these risks.

AML/CFT Programme Guideline - Updated May 2018

The guideline is designed to help reporting entities develop their AML/CFT programme as required under section 56 of the AML/CFT Act.
Developing an AML/CFT programme is the next step after conducting a risk assessment. It involves developing the procedures, policies and controls to manage and mitigate money laundering and terrorism financing risks. A reporting entities AML/CFT programme must be based on their risk assessment.

In the Ordinary Course of Business Guideline - Updated December 2017

This guideline is designed to help clarify the meaning of the phrase "in the ordinary course of business" in the definition of financial institution and designated non-financial business or profession for the Anti-Money Laundering and Countering Financing of Terrorism Act 2009. This December 2017 update replaces the previous version published in 2012.

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