The AML/CFT (anti-money laundering and countering financing of terrorism) regime helps businesses take precautions against people who would seek to misuse the business for criminal gain. It aids in protecting the professional reputation of businesses in both NZ and international markets. In order to achieve these goals, the regime requires businesses covered by the Anti-Money Laundering and Countering Financing of Terrorism Act to put systems and processes in place to prevent criminals from trying to exploit any perceived vulnerabilities in those businesses.
This means that businesses and service providers operating in the financial, legal and property markets (and sports and racing betting, and high-value goods markets from 1 August 2019) must be able to identify their customers, know their addresses and potentially know the sources of their customers’ funds. Additionally, they must set up procedures for reporting any suspicious activities and particular transactions prescribed by the AML/CFT regime.
According to the Department of Internal Affairs, the regime doesn’t require a great deal more than what is already being done by businesses that conduct good business practice. Comprehensive records and the application of critical thought will go a long way. If businesses know their customers, if they know where customers’ money is coming from and where it’s going, then business practices will not need to change much other than the requirements for codifying and record-keeping.
Some businesses will get things wrong but the regulators are looking to establish a cooperative relationship with businesses that are making a genuine effort to comply. Again, according to the Department of Internal Affairs, any anxiety felt by businesses can usually be attributed to a lack of knowledge about what is involved and once they understand what the regime requires it can become a lot less stressful. The majority of a business’s obligations can be dealt with by focusing on two basic requirements – know your customer and report suspicious activity to the Financial Intelligence Unit (FIU) properly.
Learn about and understand your AML/CFT obligations
The first thing a business with obligations under the Act needs to do is to find out what their compliance requirements are and what checks and balances need to be put in place. The Justice Department provides valuable information.
In order to fulfill its AML/CFT requirements, a business needs to do the following:
- Appoint a compliance officer
- Identify what the business’s money laundering and terrorism financing risks are by conducting a risk assessment
- Prepare a compliance programme
- Ensure the business is prepared to collect adequate customer due diligence information on new and existing customers; and
- Fulfill reporting and auditing obligations
Each of these AML/CFT requirements will be dealt with separately in The Dirty Money Series.
Next in The Dirty Money Series: Appointing a compliance officer
If one of your existing employees takes on the role of AML/CFT compliance officer, do you need to update their existing employment agreement to include the new responsibilities?
Hint: Each reporting entity must designate a person as the AML/CFT compliance officer. However, it is not as simple as just assigning an employee to the role.