As of 1 January 2019, Phase Two of the Anti-Money Laundering and Counter Financing of Terrorism Act 2009 (AML/CFT) has come into effect.
The nature of the Real Estate industry makes it attractive for criminals to conceal the proceeds of crime because it provides a veneer of legitimacy to criminally obtained funds. The AML/CFT intends to detect and therefore reduce the number of offenders who use the profession for money laundering to finance terrorism. It is estimated by the New Zealand Police Financial Intelligence Unit (FIU) that the value of financial fraud in New Zealand is $1.35 billion[1], although experts believe the actual transactional value is several times higher.
Real Estate companies should be familiar with the activities which indicate whether an entity is deemed to be a “reporting entity” under Section 5(1) of the AML/CFT. These activities include:
- Acting on conveyancing or real estate instructions to effect a transaction, such as the sale, purchase, or other disposal or acquisition of any held estate, interest in land or property
- As a Real Estate company or Agent, you are considered to be a “reporting entity” if you carry out the above activities. There are continuous compliance obligations you must adhere to. These include:
- Appointing an AML/ CML Compliance Officer- this should be a senior member of your company
- Conducting Customer Due Diligence based on the level of risk posed by a client. This involves the verification of client identities before providing services covered by the AML/ CML, and may include acquiring information about the origin of money
- Having a compliance programme, along with a written Risk Assessment in place, which is independently audited every two years
- Monitoring client’s accounts for suspicious activities or transactions that could be related to money laundering or terrorism financing. Any suspicious activities must be reported to the FIU
- Reporting any prescribed transactions to the FIU. This refers to any attempted transactions in cash by a client of $10,000 or more, or an international wire transfer of $1,000 or more
In addition to the above, we have outlined below a number of ‘red flags’ that should raise suspicion:
- Activity that is inconsistent with the customer’s usual business activity/profile, such as unusually large or complex transactions
- A customer is unconcerned by loss or makes uneconomical purchases in an intended manner
- There is a hasty urgency to compete a property transaction
- A customer attempting to evade the Customer Due Diligence, acting through an intermediary or attempting to obscure the true beneficial owner of the property
Get in touch with us to find out how Marsh’s Specialty Practice can assist with real estate risk management and provide insurance solutions that can protect businesses against potential legal liabilities.
[1] The Department of Internal Affairs Website
Disclaimer: Statements concerning legal matters should be understood to be general observations based solely on our experience as insurance brokers and risk consultants and should not be relied upon as legal advice, which we are not authorised to provide. All such matters should be reviewed with your own qualified legal advisors. The information contained in this publication is based on sources we believe reliable, but we do not guarantee its accuracy. This information provides only a general overview of the subjects covered.
