Your obligations under the AML/CFT Act
In New Zealand’s overheated housing market, huge deposits and multi-million-dollar deals have become commonplace – making it easy to hide criminal activity and legitimise illicit funds. That’s one of the reasons the industry is covered under recent updates to the 2009 Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) Act.
Designed to detect and deter money laundering and the financing of terrorism, the Act places obligations on a range of sectors – including real estate.
Does the Act apply to your business?
Compliance is based on services provided, rather than just the type of business you run. Because listed activities in the Act include real estate agents’ work to effect transactions and manage client funds, most agents are considered Reporting Entities and must meet the requirements of the Act. Read a full rundown of services here.
Your compliance obligations
Businesses that are covered under the Act are required to implement and maintain a compliance programme. This includes:
- Completing an assessment to determine your risk level
- Creating a written AML/CFT programme that includes procedures, systems and controls to manage your risks
- Appointing a compliance officer to manage your programme
- Carrying out customer due diligence (CDD or KYC) for new and existing clients
- Keeping records for at least five years
- Reporting suspicious activity to the DIA, and being prepared to submit documentation for audits as needed
What KYC looks like in practice
The ‘know your customer’ (KYC) element of your AML/CFT programme involves collecting and verifying key information before you begin work with a new client. In most cases, your clients are the vendors, as you will be completing transactions on their behalf. You also need to complete KYC for any person acting on behalf of your client, and any beneficial owners of the property or properties you’re selling.
Although it’s less common, if you are acting on behalf of purchasers you will also need to collect their information.
KYC documentation must include:
- Full name and date of birth
- Address or registered office details
- Company identifier or registration number for business clients
- Information about the proposed relationship and client background
Gathering information about the client and the proposed business relationship is a key part of the process, helping you establish the risk level associated with the client – in some cases, this may mean completing a higher level of KYC.
There are three levels of KYC: standard, simplified and enhanced.
Standard covers most straightforward residential and commercial real estate transactions.
Simplified KYC applies only if your client is one of the specific organisations or government bodies listed in the Act.
Enhanced KYC processes must be completed for clients with a higher level of risk.
Some of this comes down to a judgement call, but this level can include:
- Trusts or other vehicles for personal assets
- Non-residents, particularly those from countries without AML/CFT systems in place
- Companies with nominee shareholders or bearer shares
- Clients completing complex or unusual transactions, or patterns of transaction
- Any client displaying a ‘red flag’ under the AML/CFT Act.
If clients fit any of these criteria, you will need to not only collect and verify standard identification documents, but also documentation that shows the source of their funds. As with all KYC information, this needs to be verified with independent sources as much as possible.
Making KYC work for you
The AML/CFT Act may have a noble purpose, but it puts an added burden on real estate agents. Dealing with the requirements of the Act can be time-consuming and complex – but we can help. At First AML we are AML/CFT experts, with a particular focus on the KYC elements of the Act. Our software automates many of the time-consuming parts of the process, making it simpler for your business to manage and easier for your clients to understand. It’s about taking the complicated administration off your hands, so you can focus on selling more property.
About First AML
First AML is an AML technology provider, and the maker of Source, an all-in-one AML platform. Source powers thousands of compliance experts around the globe to reduce the time and cost burden of complex and international entity KYC. Its enterprise-wide, long term approach to the KYC / CDD data lifecycle addresses time and cost challenges while minimising compliance, reputational and security risks.