What is AML and CFT compliance?

What is AML/CFT?

The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act) place obligations on New Zealand’s financial institutions, casinos, virtual assets service providers, accountants, lawyers, conveyancers, real estate companies and high-value dealers to detect and deter money laundering and terrorism financing.

The AML/CFT Act ensures that businesses take appropriate measures to guard against money laundering and terrorism financing. This enhances the reputation of individual businesses and New Zealand as a safe place to do business.

What is money laundering?

In 2009, the Anti-Money Laundering and Countering Financing of Terrorism Act were passed to tackle the increasing exposure New Zealand is facing with money laundering and terrorism financing.

Each year about $1.35 billion from the proceeds of fraud and illegal drugs is laundered through everyday New Zealand businesses. These law changes – put in place practical measures to protect businesses and make it harder for criminals to profit from and fund illegal activity. The Act set various obligations for businesses to mitigate the risks of such criminal activity and protect New Zealand’s reputation as a good place to do business.

What is the financing of terrorism/terrorism financing?

Terrorism financing channels funds to sustain, plan and execute acts of terrorism and finance or maintain terrorist networks. People who finance terrorism use methods similar to those of money launderers. This makes it difficult for authorities to trace who is providing and receiving the money.

What is CFT under AML regulations?

Counter Financing of Terrorism (CFT) under AML regulations are a set of obligations and procedures designed to mitigate the risks and identify and prevent people from channeling funds to support violent causes.

What is the AML/CFT Amendment bill 2017?

The Government made law changes in 2017 to include a more comprehensive range of sectors under the AML/CFT Act 2009. This is known as The Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Amendment Act.

Affected sectors and businesses

The AML/CFT Act targets the financial sector and other businesses involving large money transfers. The Act now also includes these sectors:

  • Lawyers
  • Conveyancers
  • Businesses that provide trust and company services
  • Accountants
  • Real estate agents
  • Businesses trading in high-value goods
  • Sports and racing betting
  • Banks
  • Casinos
  • A range of financial service providers
  • Some trust and company service providers

What does AML/CFT compliance look like?

A risk assessment is the first step a business must take before developing an AML/CFT programme. It involves identifying and assessing the risks the reporting entity reasonably expects to face from money laundering and terrorism financing. Once a risk assessment is completed, a Reporting Entity must then implement an AML/CFT programme that manages and mitigates these risks.

How often should an AML risk assessment be carried out?

The AML/CFT Act does not specify how frequently a risk assessment is carried out. You must decide how often it is carried out. How you decide depends on:

  • The size of your business or organisation.
  • What kind of business or organisation you have.
  • How complex your business or organisation is.
  • Your level of money laundering/terrorism financing risk.

The best practice would be to complete an AML risk assessment once a year or whenever an identified trigger occurs, such as launching a new product or service, expanding into a new geographic region or implementing a new software system.

On top of conducting regular risk assessments, high-risk organisations should have independent reviews of their AML risk assessment, AML/CFT programme, and processes done at least every two to three years.

How the AML/CFT affects companies in NZ

The fundamental obligations under the AML/CTF Act are:

  • An assessment of the ML/TF risks associated with the nature of the business, products and services being provided, types of customers, jurisdictions and institutions they deal with.
  • Appointing an AML/CFT compliance officer.
  • Vetting and training of staff.
  • Meeting AML/CFT reporting and record-keeping obligations.
  • Conducting new and ongoing customer due diligence
  • Collecting and monitoring the nature and purpose of the relationship/ transactions.
  • Conducting periodic independent audits.

How to get help with AML/CFT compliance:

While the Act adds another layer for these businesses, these compliance and auditing requirements also have value for business risk management and professional reputation.

Despite their value, it can be challenging to find the time to meet these obligations, amongst many other demands. But we’re here to help.

Book a call with an AML/CFT adviser

Get in touch with us today to discover how we can help support your AML/CFT compliance needs or book a free 30-minute consultation here.