Implementation of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 - Consultation Paper on Proposed Regulations - Ministry ...
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Implementation of the
Anti-Money Laundering and
Countering Financing of
Terrorism Act 2009
Consultation Paper on Proposed
Regulations
(Tranche 2)
22nd May 2018Contents
About this paper .................................................................................................................. 3
How to have your say. .................................................................................................... 3
Personal information and confidentiality .......................................................................... 3
Overview............................................................................................................................... 4
The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 ............... 4
Current Regulations ........................................................................................................ 5
Proposals for the second tranche of regulations ............................................................. 5
Timing ............................................................................................................................. 6
Real estate............................................................................................................................ 7
Regulation proposal 1: Timing of customer due diligence ............................................... 7
Technical amendments (real estate) ............................................................................... 9
New Zealand Racing Board ............................................................................................... 14
Regulation proposal 2: Occasional Transaction threshold for the New Zealand Racing
Board ............................................................................................................................ 14
Regulation proposal 3: Treatment of ‘betting vouchers’ issued by the New Zealand
Racing Board ................................................................................................................ 16
2About this paper
The Ministry of Justice is seeking submissions on proposals for regulations under the
Anti-Money Laundering and Countering Financing of Terrorism Act 2009.
The regulations will outline how various anti-money laundering and countering
financing of terrorism measures will work. There are specific questions where we are
particularly interested in your feedback. We also welcome any other comments you
may have. Your feedback will help ensure the most effective regulations are put in
place.
How to have your say.
You can download or read this consultation document and either:
- email a submission to aml@justice.govt.nz
- post a written submission to AML/CFT consultation team, Ministry of
Justice, SX10088, Wellington, New Zealand
Please ensure your submission reaches us by 5pm on Tuesday 12th June 2018.
Personal information and confidentiality
We will hold your personal information in accordance with the Privacy Act 1993.
We accept submissions made in confidence or anonymously. Please clearly
indicate if you want your submission to be treated as confidential.
We may be asked to release submissions in accordance with the Official Information
Act 1982 and the Privacy Act 1993. These laws have provisions to protect sensitive
information given in confidence, but we can’t guarantee the information will be
withheld. However, we won’t release individuals’ contact details.
3Overview
The Anti-Money Laundering and Countering Financing of
Terrorism Act 2009
The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (the
Act) aims to detect and deter money laundering and terrorism financing. It requires
certain businesses to put anti-money laundering and countering financing of terrorism
(AML/CFT) measures in place. These include assessing the money laundering and
terrorism financing risks their business may face, establishing a compliance
programme, confirming their customers’ identities, and reporting suspicious activities.
Banks, casinos and a range of financial service providers (‘Phase 1 reporting
entities’) have been subject to the Act since 2013.
Amendments to the Act in 2017 extended the AML/CFT regime to cover more
businesses at risk of being used to launder money and finance terrorism (referred to
here as ‘Phase 2 reporting entities’). A staged approach is being taken to
implementation of these businesses which include:
• lawyers, conveyancers and trust and company service providers – must
comply from 1 July 2018
• accountants – must comply from 1 October 2018
• real estate agents – must comply from 1 January 2019
• the New Zealand Racing Board and certain businesses that deal in high value
goods (such as cars, boats, jewellery, art) – must comply from 1 August 2019.
The 2017 amendments also made changes to the Act which apply to both Phase 1
and 2 reporting entities, for example, expanding reporting to Police from suspicious
transactions to a broader class of suspicious activities.
The Act can be found at: www.legislation.govt.nz
General information on the AML/CFT regime is available at: www.justice.govt.nz/aml-
cft This includes Cabinet papers setting out policy decisions on the Amendment Act.
The proposed regulations are discussed below.
4Current Regulations
A range of regulations have already been made under the Act which completed
Phase 1 of the reforms, and the first part of the Phase 2 reforms. Additional
regulations are required to implement further AML/CFT reforms.
New regulations are being made in a series of different rounds called ‘tranches’. The
first tranche of regulations was released in December 2017. This tranche was made
in readiness for the first Phase 2 reporting entities (lawyers, conveyancers, and trust
and company service providers) to comply on 1 July 2018, and providers of
accountancy services to comply on 1 October 2018. In addition, regulations which
affect all reporting entities, such as suspicious activity report requirements, were
included.
The second tranche of regulations will relate to the real estate sector and the New
Zealand Racing Board.
Alongside the work on regulations, the New Zealand Police’s Financial Intelligence
Unit (FIU) has provided a revised National Risk Assessment. The Department of
Internal Affairs has provided a Phase 2 Sector Risk Assessment and sector
guidelines to help businesses understand and meet their AML/CFT obligations.
Development of additional guidelines is underway.
Proposals for the second tranche of regulations
The proposals for the second tranche of regulations include:
Real estate:
• setting the timing of customer due diligence for real estate agents; and
• addressing three technical matters relating to the wider real estate sector.
New Zealand Racing Board
• setting the occasional transaction threshold for the New Zealand Racing
Board at $6,000 and above; and
• prescribing that New Zealand Racing Board betting vouchers are a Stored
Value Instrument if they have a value of $6,000 and above.
It is also proposed to prescribe a specific Annual Report form for the New Zealand
Racing Board. This is consistent with requirements for other Phase 2 businesses.
5Timing
We expect the second tranche of regulations will be in place in July 2018. This will
give affected businesses a reasonable lead-in time to set-up the required AML/CFT
systems and processes before they must comply.
6Real estate
Regulation proposal 1: Timing of customer due diligence
The Act provides for real estate agents to carry out standard, simplified and
enhanced ‘customer due diligence’ (CDD), at the times specified in regulations.
CDD involves collecting and verifying identity information from customers and in
some circumstances (such as if a customer is a trust), gathering information about
where the money came from and other people involved.
From 1 January 2019, real estate agents will be required to carry out CDD on their
customer, in respect of the purchase or other acquisition of real estate. This will
generally be a vendor but in some circumstances, when a real estate agent is acting
as a buyer’s agent and representing the buyer, it will be a purchaser.
Proposal
We propose, through regulation, to require real estate agents to carry out CDD when
they enter into an agency agreement with their customer.
Adopting this approach, CDD would be conducted early in the business relationship
when the agency agreement to either sell a property, or act on behalf of a
prospective purchaser (as a buyer’s agent), is signed.
Carrying out CDD when entering an agency agreement aligns with existing business
practices and obligations. There are a range of other legal requirements to be met at
that stage, so CDD would be easier to build into existing operating practices than
later in the process. Conducting CDD early on customers helps reduce operational
risks associated with having to slow or halt a sale to complete CDD late in the
transaction. Customers are likely be more motivated to provide verification
information at that time.
In addition, this approach provides consistency across real estate agents and is
easier to monitor. It is also consistent with other Phase 2 businesses, which are
required to carry out CDD before providing any service covered by the Act.
The proposed regulation is:
For the purpose of sections 14(3), 18(3A), and 22(6) of the Act, a real estate agent must
conduct customer due diligence before the real estate agent enters into an agency
agreement (within the meaning of section 4(1) of the Real Estate Agents Act 2008) with a
customer.
7Questions
1. Is the time when real estate agents are entering into an agency
agreement with their customer, the best time to carry out CDD on
their customers?
2. Why/why not?
8Technical amendments (real estate)
We propose, through regulations, to make three technical amendments relating to the real
estate sector.
Proposed technical change
1. Amend AML/CFT (Definitions) Regulation 21A to remove the exclusion for
licensed and registered auctioneers from 1 January 2019
Licensed and registered auctioneers are currently excluded from the Act via Definitions
Regulations 21A. The proposed amendment will give effect to the policy intent of the
Phase 2 AML/CFT reforms to specifically include auctioneers who sell any of the high
value goods listed in section 5(1) of the AML/CFT Act, such as cars, boats, jewellery, art
etc. by way of cash transactions, as high value dealers.
High value dealers do not come into the regime until 1 August 2019. However, to ensure
the Act is applied consistently between registered auctioneers and licensed real estate
agents (both of whom can auction real estate), it is proposed that the amendment take
effect on 1 January 2019, when real estate agents become part of the regime.
Questions
3. Do you have any comments about the proposal to include
licensed and registered auctioneers for the purposes of the Act,
by 1 January 2019? Please explain.
9Proposed technical change
2. Clarify the definition of ‘customer’ for real estate agents
The current policy setting is that real estate agents must conduct CDD on their
‘customer’ but not the other party in the real estate transaction (who will be covered by
their lawyer or conveyancer), unless they receive a deposit of $10,000 or more in cash.
The current wording in the Act is ambiguous and may inadvertently capture all deposits
(cash or electronic) received by a real estate agent. It may also capture the actions of an
agent, representing a vendor, that assists a purchaser to complete a sale and purchase
agreement, thereby triggering CDD. Therefore, it is proposed to clarify:
• That (subject to the point below) the other party or parties to a real estate
transaction are not the agent’s ‘customer’ for the purposes of the Act; and
• That a real estate agent must carry out CDD on any person who makes a cash
deposit of $10,000 or more.
The proposed definition of customer is:
For the purposes of paragraph (c) of the definition of customer in section 5(1) of the Act
a customer, in relation to a real estate agent (as defined in section 4(1) of the Real
Estate Agents Act 2008—
(a) means a client (as defined in section 4(1) of the Real Estate Agents Act 2008) of that
real estate agent; and
(b) does not include any party to a real estate transaction on whose behalf the real
estate agent is not carrying out real estate agency work; but
(c) despite paragraph (b), includes a person who conducts an occasional transaction1
with a real estate agent.
1 An ‘occasional transaction’ is a cash transaction that occurs outside of a business
relationship and is equal to or above the applicable threshold value, currently $10,000
(the transaction may be carried out in a single operation or several operations that
appear to be linked).
10Questions
4. Do you have any comments about the proposal to clarify the
definition of ‘customer’ for real estate agents? Please explain.
11Proposed technical change
3. Exclude property management activities from the Act
This proposal will give effect to the stated policy intent that property managers (and
property management activities) would not be captured by the Act, even though they can
be ‘managing client funds’. This exclusion will apply to property management activities
carried out by real estate agents and property managers, i.e. professionals who carry
out property management activities but are not also licensed real estate agents.
It is proposed that the exclusion be reviewed and assessment of the money laundering
and terrorism financing risks associated with property management activities be
undertaken as part of the Statutory Review in 2021. By that stage there will be more
data available on the real estate sector. This approach is consistent with the Financial
Action Task Force. This is an inter-governmental body that sets international best
practice standards for AML/CFT requirements and approaches adopted overseas. For
example, in the United Kingdom and Canada property management agents and
activities are not covered.
One potential definition of property management activities is:
(a) means—
(i) acting, or offering to act, for reward in respect of the negotiation, grant, approval or
assignment of tenancies in relation to residential premises (within the meaning of section
2(1) of the Residential Tenancies Act 1986), irrespective of whether that activity is
carried on by itself in conjunction with other businesses; and
(ii) in relation to any real property (whether residential premises, commercial property or
other real property)—
(A) collecting or offering to collect money payable for the use or repair or improvement of
any property; and
(B) holding or disbursing money received for the use or repair or improvement of any
property; and
(C) holding or disbursing money received for the advertising of or negotiating the use of
any property:
(b) includes advertising or negotiating, or any other act done directly or indirectly for the
purpose of carrying out any activities referred to in paragraph (a); but
(c) does not include—
(i) acting, or offering to act, for reward in respect of the negotiation, grant approval or
assignment of a tenancy agreement for commercial premises (whether described as a
lease, tenancy agreement or otherwise) in relation to commercial premises (within the
meaning of section 2(1) of the Residential Tenancies Act 1986); or
(ii) real estate agency work (within the meaning of section 4(1) of the Real Estate Agents
Act 2008
12Questions
5. Does the potential definition of ‘property management activities’
reasonably describe the scope of activities a professional
providing property management services would carry out?
13New Zealand Racing Board
Regulation proposal 2: Occasional Transaction threshold
for the New Zealand Racing Board
Businesses covered by the Act are referred to as ‘reporting entities’. The Act requires
a reporting entity to carry out customer due diligence (CDD) if a customer seeks to
conduct an ‘occasional transaction’ through that reporting entity.
An occasional transaction is a cash transaction that occurs outside of a business
relationship and is equal to or above the applicable threshold value. The transaction
may be carried out in a single operation, or several operations that appear to be
linked.
The current occasional transaction threshold for most sectors is $10,000. This
applies unless a different threshold is specified, for example:
• Casinos - $6,000
• Travellers cheques - $5,000
• Money orders, postal orders, wire transfers and currency exchange - $1,000
• Stored Value Instruments - $1,000 if redeemable for cash or $5,000 if not
redeemable for cash, $6,000 for casino chips.
Proposal
We propose, through regulation, to set the occasional transaction threshold for the
New Zealand Racing Board at $6,000 and above.
The gambling and betting sectors are rated medium/high risk by the Department of
Internal Affairs in their respective sector risk assessments. In reviewing the New
Zealand Racing Board risk profile there are various parallels with casinos. For
example, both casinos and the New Zealand Racing Board offer services that allow
for anonymous placement of cash, and subsequent potential anonymous pay-outs,
making them attractive to money launderers.
Given those similarities, it is proposed to align the occasional transaction threshold
for the New Zealand Racing Board with that for casinos at $6,000 and above.
This approach will ensure fair and consistent treatment and help reduce the risk of
money laundering activity switching between the New Zealand Racing Board and
casinos.
14Questions
6. Is the threshold of $6,000 and above for an occasional
transaction appropriate for the New Zealand Racing Board?
7. Should the New Zealand Racing Board and casino thresholds
be aligned?
8. Are there other matters that should be considered in setting the
threshold?
9. Why/why not?
15Regulation proposal 3: Treatment of ‘betting vouchers’
issued by the New Zealand Racing Board
A customer can ‘deposit’ money with the New Zealand Racing Board in return for a
betting voucher. These vouchers can be used like cash to place bets or add money
into an account. The value of a voucher can be added to and ultimately a voucher
can be converted to cash.
A common way to obtain a voucher is through a Self-Service Terminal. A Self-
Service Terminal is a standalone self-service touch screen machine which can be
located across the New Zealand Racing Board network. This may be within another
business such as a hotel where no other betting services are available. A Self-
Service Terminal can be used anonymously and does not require the customer to be
an account holder to use all the functions.
Vouchers present a high money laundering risk because they are easily moved
around, able to be obtained anonymously from a Self-Service Terminal, and lack
transparency.
However, voucher is not currently defined in the Act, and as such, people using these
betting vouchers are not subject to customer due diligence (CDD).
Proposal
We propose, through regulation, to include the New Zealand Racing Board betting
vouchers within the definition of a Stored Value Instrument if it has a value of $6,000
or more.
A Stored Value Instrument is defined in section 15 of the AML/CFT (Definitions)
Regulations 2011 as a portable device including a gift facility that is capable of
storing monetary value in a form that is not physical currency, regardless of whether
the device is reloadable or able to be redeemed for cash.
Like Stored Value Instruments, which trigger CDD if they meet the specified
threshold, betting vouchers are portable and store a monetary value that is not
physical currency. Including betting vouchers within the definition of a Stored Value
Instrument will remove any inconsistency or ambiguity in the treatment of vouchers.
Casino chips are similarly deemed a Stored Value Instrument with a threshold of
$6,000 and above. The New Zealand Racing Board’s betting vouchers have similar
characteristics to casino chips. Both are anonymous, easily transferred to a third
party, and readily exchangeable for cash.
Given those similarities, we propose that the approach for the New Zealand Racing
Board’s betting vouchers be the same as that for casino chips. This approach will
ensure consistent treatment and help reduce the risk of money laundering activity
switching between the New Zealand Racing Board and casinos.
16The definition of voucher is proposed to be:
any document or other instrument issued by the New Zealand Racing Board to a
person that has a monetary value and can be used to facilitate or carry out a
transaction (for example to place a bet, or to top up an account) irrespective of
whether—
(a) it can be redeemed for cash:
(b) it can be split or consolidated for use in 2 or more transactions.
Questions
10. Do you agree that a voucher with a value of $6,000 and above,
issued by the New Zealand Racing Board, should be treated as a
Stored Value Instrument for the purposes of the AML/CFT Act?
11. Do you agree with the proposed definition of voucher?
12. Why/why not?
17Ministry of Justice Tāhū o te Ture justice.govt.nz info@justice.govt.nz 0800 COURTS 0800 268 787 National Office Justice Centre | 19 Aitken St DX SX10088 | Wellington | New Zealand 22 May 2018
You can also read
