The AML regime in New Zealand is phased, with those institutions considered to be at higher risk of ML/FT designated as œPhase 1 entities (banks, casinos, insurers and other financial institutions) and a range of other entities, including accountants, lawyers and real estate agents designated as œPhase 2 entities. For accountants the ˜rubber hits the road™ on 1 October 2018, meaning firms like ours are thinking quite carefully about the regime and ensuring that we are ready to comply.
The questions playing on people™s minds are: Will the AML regime bring much change to the accounting profession? Will there be many transactions to report? The stats are staggering with the Ministry of Justice estimating that $1.35 billion from the proceeds of fraud and illegal drugs is laundered through legitimate businesses in New Zealand each year. That is a lot of money! The recently released Guideline: Accountants “ Complying with the AML/CFT Act 2009 considers that: œBoth domestic and international evidence suggests that using gatekeepers, such as accountants, is a way for criminals to create a false perception of legitimately acquired wealth. This makes sense to me.
Putting my criminal hat on for a moment, if I wanted to make my funds look ˜clean™ I would absolutely look to legitimise them by using a firm of professional, credible accountants. The Guidelines include a number of cases where criminals used accountants to set up companies and trusts, directing a series of complex transactions and commingling funds from their legitimate and criminal activities to ˜layer™ and disguise the true nature of the illegitimate funds.
The AML regime will undoubtably lead to an increase in compliance costs for accountancy firms as additional client identification and verification, ongoing monitoring and reporting is required, as well as the development of a risk assessment, compliance programme, annual reporting and biennial audits.
However, on the bright side. One of the key phrases of the AML regime is ˜KYC™, Know Your Clients. This could well be the silver lining or the magic bullet. As accountants, we inherently know our clients well, we are interested in their businesses, in understanding how they work and what makes them tick. This will be instrumental in helping us comply with the requirements of the AML regime. KYC will form the basis of our processes for complying with the risk-based AML regime and will help us to continue to add value to your business.
As an eternal optimist, a dedicated accountant and a proud Kiwi, I am glad that New Zealand is taking a strong stance to protect the integrity of the international financial system and taking appropriate action to keep our beautiful country safe and our reputation as responsible global citizens rosy.