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Brief Counsel

Anti-money laundering regulation - the detail at last

04 July 2011

​Business now has increased certainty regarding the application of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML) with the setting of the commencement date and the release of supporting regulations. 

All businesses subject to the regime will need to be compliant on and from 30 June 2013.

Many financial market participants will be just drawing breath after the implementation of the Financial Advisers Act 2008.  The compliance deadline for AML now looms large as the next big challenge not just for the finance sector, but for other sectors as well (including casinos).

Unsurprising, but the detail is important

Much of the likely content of the regulations has been known for some time but affected entities will need to work carefully through the detail and the implications for their business including:

  • the effect on their AML planning, in particular the definitions which set the parameters of how the AML will apply to “occasional transactions” and “designated business groups”, groups within which a member can rely on the due diligence of another member (which will be important for large corporates), and
  • the extent to which relevant exclusions and exemptions may alleviate some or all of the compliance burden, either generally or for certain types of transactions.

Early planning is desirable

30 June 2013 is not far off so time is of the essence.  If an exemption is needed, the key will be to apply early.  The Ministry of Justice has helpfully published a Ministerial Exemption Policy which sets out how to apply, the process that will be followed and the basis on which the application will be assessed.

A user-friendly guide to the regulations

The detail is complex so for a full understanding of the nuances, it is important to scrutinise the regulations themselves or seek advice. 

Definitions 

​Definition... ​includes... ​which means...
Beneficial owner​ An individual who owns 25% or more of an entity​ Customer due diligence requirement will extend to individuals holding 25% or more of corporate customers​
Designated business group​
  • Groups of related companies (including related overseas companies)
  • a group of which all entities are “sub-agents” of the same “money transfer agent"
Corporate groups, and groups of money transfer agents and sub-agents, may generally rely on one another to conduct customer due diligence (note: an opt-in election process applies)
Occasional transaction​ A transaction that is outside a business relationship and is over $9,999

A transaction outside a business relationship which involves:
  • a cash transaction in a casino that is for $6,000 or more
  • travellers cheques for $5,000 or more
  • money orders or postal orders for $1,000 or more
  • currency exchange transactions for $1,000 or more
  • certain stored value instruments that are redeemable for cash which have a maximum potential value of $1,000 or more
  • certain stored value instruments that are not redeemable for cash which have a potential value of $5,000 or more​
Reporting entities must complete customer due diligence in each of these situations​
 
A...​ ​Does NOT include... ​Which means...
Reporting entity​
  • An entity which would otherwise be a reporting entity, but that only  provides services that are exempt from the Act
  • accommodation providers that provide guests with safety deposit boxes
  • lawyers, accountants, real estate agents and pawnbrokers
  • financial institutions that are in liquidation
  • government departments and the Reserve Bank​
These persons will not be required to comply with the obligations under the Act ​
 

Exemptions 

An exemption applies to...​ which means the reporting entity is exempt (wholly or partly) from...​
A wire transfer of $1,000 or less​ The identity and verification requirements of the Act​
An “occasional transaction”, that is, a transaction that occurs outside a business relationship​ The obligation of verifying address information​
Specified transactions below $6,000 that take place in casinos​ Certain record-keeping requirements​
Transactions which are not “occasional transactions” and do not involve wire transfers over $1,000​ The obligation to record the details of the transaction​
Exchange of currency in hotels of $1,000 or less​ The provisions of the Act, except for the requirement to record the nature and the amount of the transaction and, where applicable, the requirement to make a suspicious transactions report​
Remittance card facilities that meet specified conditions (which facilitate the transfer of money to a second account holder overseas) ​ All AML obligations, in respect of the second overseas account holder​
Pure risk-based insurance policies and all closed insurance policies​ All AML obligations​
Certain consumer credit provided by non-finance businesses (such as store account cards)​ All AML obligations​
Certain loyalty schemes (such as Fly Buys)​ All AML obligations​
Stored value instruments whose maximum permitted value is less than:
  • $1,000, if redeemable for cash, and
  • $5,000, if non-redeemable​
All AML obligations​
​Services provided to a person who is a related entity of the reporting entity All AML obligations​
Premium funding agreements (essentially finance associated with insurance policies)​ All AML obligations in the case of the issuing insurance company, and from the customer due diligence requirements in the case of non-insurers​
Promoting, facilitating or establishing low-value life insurance policies and memberships, facilitated by employers, in superannuation schemes​ Verification of identity at the time the business relationship is established  (although, such verification must be carried out before the customer receives the first payment under the insurance)​
Securities registry services​ Certain record-keeping obligations and, where applicable, the requirement to make a suspicious transaction report​
Debt collection services​ All AML obligations except for certain record-keeping requirements and, where applicable, the requirement to make a suspicious transaction report​
Certain overseas pension accounts​ Customer due diligence requirements​
Certain trust accounts held by a customer who is itself a reporting entity (and subject to other criteria, such as the requirement for a written agreement with that other reporting entity)​ Customer due diligence requirements in relation to the persons whose moneys are held in the trust accounts​
 

Next steps

Links and some further explanation are provided below.
In addition to the Commencement Order, the regulations:
  • clarify the scope of some of the provisions of the Act by defining key terms, as well as excluding and including certain entities as “reporting entities” under the AML 
  • exempt (wholly or partly) certain types of transactions and certain entities from the scope of the AML 
  • prescribe certain levels of customer due diligence for specific scenarios (including anonymous accounts and beneficiaries of trusts), as well as prescribing the content requirements for annual reports by reporting entities, and
  • prescribe the form in which the Minister must make Ministerial exemptions (these can be applied for any time from 28 July 2011). 

Our thanks to Russell Weir, Solicitor, for writing this Brief Counsel.

For further information, please contact the lawyers featured.

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