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Anti-Money Laundering Compliance for Accounting
Ten years ago, we could not foresee, even in our wildest dreams, that one ACT would so fundamentally impact the Finance industry and later, other professional services. The Act I refer to, is the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML & CFT Act, hereafter the ACT). Due to this ACT, NZ business society has been transformed from the world’s easiest place to conduct business, to a sea of forms.
From 1 October 2018 on, as an accounting firm, we are required to comply with the ACT.
What does that mean to us?
When we accept a new client, we need perform mandatory due diligence. We are required to collect identification information and proof of address as a minimum. The photo ID we collect from you has to be verified, which means we have to meet you face to face and check the original ID against you before taking a copy. If we cannot meet with you and verify this ourselves, the ID needs to be verified by a public notary or a lawyer. The proof of address required is a utility bill, bank statement or other document, sent to your address within the last three months. In addition to obtaining your Identification and proof of address, we need to take reasonable steps to verify the information you have provided is authentic.
Is that enough? Not necessarily!
If you are identified as a high risk client then we will need to do an Enhanced Customer Due Diligence on you. What kind of clients are high risk according to the ACT? Listed below are some examples (not an exhaustive list):
- All trusts
- All companies with at least one trust as its shareholder
- Clients from countries that are regarded as high risk (all tax havens and non-democratic countries will be deemed high risk). Examples of high risk counties may be: British Virgin Islands, China, Hong Kong, Singapore.
- Clients who have significant wealth
Once we have identified clients who require Enhanced CDD, we need to ask clients about the source of their wealth.
What if we find your ID is fake and source of income suspicious?
Firstly, we cannot take you on as a client and provide services to you. Furthermore, we are obligated to report you to the relevant authority and cannot notify you that we are doing so. Therefore, authorising us to undertake a CDD means that we may need to disclose your information to the relevant authorities if we come across any issues or risk factors. We will obtain your consent to carry out a CDD or Enhanced CDD, however it is important you understand the consequences of providing this consent.
For our existing clients, we will need to follow the same procedure within a reasonable time frame. We need to do a standard CDD on everyone and identify anyone who requires Enhanced CDD. We will endeavour to tailor the level of CDD required after reviewing information we already hold, i.e. whether we have met you, whether we already have any identification information, etc. GS will try to combine this process with the provision of services to you, i.e. preparation of your annual reports, handling your money through our trust accounts, providing a tax opinion or helping with any transaction.
If we are satisfied with the result of the CDD, we will be able to provide services to you. However we are still required to adequately monitor any activities and report any suspicious transactions in the future, without alerting you.
Every two years, we are required to engage an auditor to review and audit our AML procedure to make sure we comply with the ACT. We are subject to random audits by the relevant authority, and we will be penalised for any non-compliance.
What does that mean to you as our clients?
Financial institutions and legal firms have already had their ACT compliance dates before Accounting Firms. Therefore if you have had dealings with a financial institution such as a bank, or dealt with any lawyers over the last six months, you’ll be pretty familiar with these requirements already.
You should also have a thorough review of the sources of your wealth to make sure they are from legitimate income and all the tax in regard to this income has been paid in the relevant jurisdictions. We can assist you with this should you require as one of the services we offer, is helping our clients review the source of their income and to provide tax opinions on our clients tax residency and tax obligations. Again, please note that should we come across any suspicious information, we will be obligated to report this to the relevant authorities without notifying you.
Before adopting any comprehensive ownership and financing structure or tax planning, you need to be aware of these additional requirements across financial institutions and professional services firms. Are you able to conduct any business or hold assets under your proposed (or current) structure? Can you open and operate a bank account? Are you able to comply with all the requirements of an enhanced customer due diligence that will be required by your professional services firms?
Keep your financial matters honest, straightforward, clear and transparent. That way, you have nothing to hide, hence nothing to worry about. If you feel there may be any issues, you should understand how to resolve this sooner rather than later.