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Issue #14 – December 2016

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I know that this time of year is extremely busy for your businesses, and that for most of you that’s a really good thing! To any and all of you impacted by the recent Kaikoura earthquake I wish you a speedy recovery, and hope you have the support you need. Please don’t hesitate to contact us if you have any questions or concerns about your AML/CFT compliance. We’re happy to hear from you. Send an email to amlcft@dia.govt.nz or Freephone 0800 25 78 87. Our building has done its job well, and we had only two days out of the office. Our Departmental colleagues in two other Wellington buildings have not yet been able to return to work, so we’re sharing desks with them as much as we can.  Certainly the silver lining of any major natural disaster is seeing the way people and communities pull together to support each other.

I hope you find the articles we’ve put together useful. If you’re too busy at the moment we won’t mind if you read them when you get back to the office in January! The key message is really for those of you who will be required to meet prescribed transaction reporting requirements when the obligations come into force in November 2017. Have a close read of the information below, and the information on the Police Financial Intelligence Unit website. More information will be available in the New Year.

I also encourage you to make a submission on the second round of public consultation for phase II of the AML/CFT regime that the Ministry of Justice has released. You’ll see that we are the proposed supervisor for phase II reporting entities. I can tell you that we’ve been very busy working with the Ministry of Justice and other AML/CFT agencies over the past months on phase II development.

On behalf of all the team at the Department of Internal Affairs, I wish you and your loved ones a safe and merry Christmas, and a happy (and sunny!) New Year. Our offices close on 23 December 2016 and reopen on 4 January 2017.

Natasha Weight
Manger Financial Integrity

Prescribed Transaction Reports – new obligations!

The Anti-Money Laundering and Countering Financing of Terrorism (Prescribed Transactions Reporting) Regulations 2016 are now available on the New Zealand Legislation website.

As a reporting entity, it is important you understand these regulations as they outline new requirements for reporting “prescribed transactions” to the New Zealand Police Financial Intelligence Unit (FIU).   

A prescribed transaction means a transaction conducted through the reporting entity in respect of:

  • an international wire transfer of a value greater than NZ$1,000 (also known as International Funds Transfers or IFTs)
  • a domestic physical cash transaction of a value greater than NZ$10,000 (also known as Large Cash Transactions or LCTs).

From November 1 2017, reporting entities must submit prescribed transaction reports to the Police Financial Intelligence Unit (FIU).
The Anti-Money Laundering and Countering Financing of Terrorism Amendment Act 2015 specifies that where a person conducts a prescribed transaction through a reporting entity, the reporting entity must report the transaction.

Further information on Prescribed Transactions Reports is available on the Financial Intelligence Unit (FIU) website.

If you have a question you can either email the Department at amlcft@dia.govt.nz or email the FIU at goamlconsult@police.govt.nz

AML/CFT Phase II: Public Consultation due 27 January 2017

The Department would like to draw your attention to the Ministry of Justice (the Ministry) consultation on the AML/CFT Phase II Exposure Draft Bill. The purpose of this consultation is to get feedback to help ensure the Phase II laws appropriately balance two needs – effectively detecting and deterring money laundering and terrorist financing, and minimising the compliance costs for businesses and their customers.

The Ministry is asking for input on three key issues:

  • Is the exposure draft of the AML/CFT Amendment Bill clear and does it accurately reflect the initial proposals outlined in the paper?
  • Can businesses use provisions in the Bill to reduce compliance costs associated with Phase II?
  • What else can be done to help businesses reduce compliance costs associated with Phase II?

You may think that the consultation is not about you or your business but it is an opportunity to have your say on the shape of AML/CFT legislation amendments. Some of the suggestions could benefit you and your business by highlighting ways to reduce costs. For more detailed information please take a look here.

The Department encourages you to have your say. When you are ready to provide your feedback you can:

The deadline for submissions to the Ministry is 5pm, Friday 27 January 2017.

Virtual and Serviced Offices

The Department has recently been requested by a Trust and Company Service Provider (TCSP) to clarify the basis on which the provision of serviced office facilities is captured under the Anti-Money Laundering and Countering of Financing of Terrorism (AML/CFT) Act 2009 (the Act).

Specifically, the Department has been asked whether a TCSP that provides physical office space to its customers is required to comply with the Act in relation to these services.

The basis for being caught under the Act

Regulation 17(2) (c) of the AML/CFT (Definitions) Regulations 2011 applies when a person or company, as the only or principal part of its business, provides “a registered office, a business address, a correspondence address, or an administrative address for a company, a partnership, or any other legal person or arrangement”.

This list of services are all directed at the provision of an address to a customer, whether for official legal purposes (such as a registered office) or for correspondence. The methods by which these services are provided will typically include mail handling, mail forwarding, phone answering and messaging, as well as other associated administrative and representative functions.

Virtual office services

Where a TCSP provides such services to a customer, and that customer has no corresponding usage or access to physical space at the premises of the TCSP, this is commonly referred to as a “Virtual office” service. Virtual office services are caught by the Act.

Providing physical space or serviced office facilities

However, where a customer does have access to, and usage of, physical space at the  address of the TCSP, determining whether this type of service is caught by the Act may be less straightforward. This is particularly so considering that many TCSPs offer both virtual and serviced office facilities to their customers. And in some cases, there is not always a clear distinction between the two types of product offering. Relevant factors include:

  • Where a customer occupies physical space at the premises of the TCSP, attends it, collects their own mail (rather than it being forwarded elsewhere) and ordinarily deals with their own correspondence directed to the address, this is essentially little more than a landlord/tenant arrangement. This type of service will not be caught by the Act.
  • However, where additional services such as mail forwarding, receptionist and phone messaging and forwarding are provided, this goes beyond a typical landlord/tenant arrangement. In these circumstances, and particularly where there are restrictions to the extent or availability of the usage of the physical space, this would potentially be caught by the Act.
  • Ultimately, where the additional services provided are more than ancillary and represent a customer to be at the address of the TCSP when they are ordinarily not, this type of product offering would be caught by the Act.

GoAML training

All reporting entities must be registered with the Police Financial Intelligence Unit (FIU) to use goAML.  goAML is the prescribed method by which reporting entities submit suspicious transaction reports (STRs) to the FIU.

To help with this process, the FIU offers goAML training to reporting entities around New Zealand. Benefits include hands-on training using goAML, information provided on the correct drop-down boxes to use, and the opportunity to ask the FIU any specific questions you may have. You will also have an opportunity to practise the most prevalent types of transactions your company will come across while under the guidance of FIU staff.

If you are interested in goAML training please email goAML@police.govt.nz.

Do we need to collect CDD on a customer whom we personally know?

A question many smaller reporting entities ask the Department is: “Do we need to collect CDD on customer whom we personally know?” The answer is, yes, if the Act requires CDD be obtained.

In such cases, CDD must be collected on customers, regardless of whether this person is a stranger or someone you know quite well. For example, while knowing a customer can inform the reporting entity regarding risks involved in dealing with this person, the Act nevertheless requires that CDD be collected and held for all business relationship customers and for those who conduct an occasional transaction.