AML/CFT & PROFESSIONAL SERVICES FIRMS
Professions next in line
Professions next in line
Professional obligations
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Lawyers and Conveyancers Act 2006
5. Fundamental obligations of lawyers (a) ..uphold the rule of law and facilitate the administration of justice in New Zealand (d) ...protect, subject to his or her overriding duties as an officer of the High Court and to his or her duties under any enactment, the interests of his or her clients. Rules of Conduct and Client Care for Lawyers 2.4 . A lawyer must not ... assist any person in any activity that the lawyer knows is fraudulent or criminal [or ]knowingly assist in the concealment of fraud or crime. 8.4. A lawyer may disclose confidential [client] information where... (b) the information relates to the anticipated commission of a crime or fraud; or (d) the lawyer reasonably believes that the lawyer's services have been used by the client to perpetrate or conceal a crime or fraud and disclosure is required to prevent, mitigate or rectify substantial injury to the interests, property or reputation of another person that is reasonably likely to result or has resulted from the client's commission of the crime or fraud. [and see 8.5] 11.4. A lawyer must take all reasonable steps to prevent any person perpetrating a crime or fraud through the lawyer's practice. |
New Zealand Institute of Chartered Accountants Act 1996
5. The functions of Institute are (a) to promote quality, expertise and integrity in the profession of accountancy by its members in New Zealand.. (c) to promote the training [and] education of [the accounting profession] Code of Ethics 14. Members have an important role and position in society. Members can remain in this position only...with ethical standards designed to maintain public confidence that the accountancy profession will act in the public interest. 15. The public interest is defined as the collective well-being of the community of people and institutions the profession serves... 16. Integrity is a quality of overriding importance for all members...Adherence to the fundamental principle of integrity...allows the public to derive their trust in the accountancy profession. It is also the benchmark against which [accountants] must ultimately test all decisions. 18. Integrity is measured in terms of what is right or just. |
Real Estate Agents Act 2008
3. The purpose of this Act is to promote the interests of consumers...and promote public confidence in the performance of real estate agency work. Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 6.3 A licensee must not engage in any conduct likely to bring the industry into disrepute. |
Even exempt professional services firms are already affected
Although many professional services firms fall within the definition of “reporting entity”, specified businesses have been granted a temporary exemption - which is already in the process of planning to be removed.
Temporarily exempt businesses include lawyers, accountants, conveyancing practitioners and real estate agents. If any of these businesses’ existing structures and practices fall outside the exemption, however, the legislation will apply to those operations.
Most professional services firms will also be affected through their interactions with banks and other financial institutions, and these firms - even if temporarily exempt - may have as little as a year to build capability and systems to meet what is likely to be their biggest operational change in decades.
We have identified a range of areas in which the new legislation will affect many professional services firms businesses immediately. The combined effect on some firms may be to materially raise their risk profiles.
Is there any evidence that professional services firms are really at risk?
Yes. Criminals seek out the involvement of lawyers, accountants and real estate agents in their money laundering activities. The skills of these professionals are often useful, and may even be required to structure or complete certain transactions.
Recent trends over the past decade has seen a marked increase in the sophistication of methods employed by money launderers and terrorist financers; with complex financial transactions, large scale property acquisition and cross border activity requiring specialist assistance.
The global spread of more effective supervision of legitimate businesses traditionally used by criminals - such as banks, casinos and money remitters - has further increased the pressures on professional services firms as criminal networks transfer their attention to remaining weak links.
The benefit for professional services firms keen to protect their businesses from involvement in criminal activity (and the attendant risk of financial sanctions and reputational damage) is that they can draw on a growing body of methods, techniques and 'typologies' that criminals use to target lawyers, accountants and real estate agents. Identifying the key red flags that relate specifically to the parts of your business most susceptible to money laundering and terrorist financing risk is a vital first step in the process of informing and educating staff; and a first defence in deterring and detecting the risks facing your business.
Lawyers and other professionals as active members of our community
New Zealand police are making the transition from reactive to proactive (as outlined at About AML CFT under the heading "What are the new laws really about"). The real question then, is the extent to which lawyers will also do so, in accordance with their overriding duties as officers of the court and core professional obligations to facilitate the administration of justice and uphold the rule of law. Similarly for accountants and real estate agents.
As professionals in our own communities, do we fight to maintain or extend the 'sanctioned loophole' of a temporary exemption to the law that lets us turn a blind eye? Do we wait until the exemption is removed before even starting to try and understand vulnerabilities that mean our own businesses might inadvertently be used to further criminal activity? And do we really think that if up to as much as $40-100 million is being laundered each week that our business has never and could never be used in this way?
Opportunity to build capability early
Many exempt businesses will choose - for reasons of prudence, best practice, reputation or competitive advantage - to begin incorporating some of the capabilities that are becoming standard New Zealand business practice.
Banks had more than three years to prepare. Professional services firms potentially have as little as another year or so to prepare for the biggest change to their operations in decades. Realistically it may be longer, but the law has been in place since 2009.
Financial institutions must comply in the full glare of regulatory oversight. Exempt businesses have the benefit of a brief window of opportunity to build AML/CFT awareness, expand operational capabilities and ensure no hidden surprises before mandatory reporting and regulatory supervision applies to their operations.
Although many professional services firms fall within the definition of “reporting entity”, specified businesses have been granted a temporary exemption - which is already in the process of planning to be removed.
Temporarily exempt businesses include lawyers, accountants, conveyancing practitioners and real estate agents. If any of these businesses’ existing structures and practices fall outside the exemption, however, the legislation will apply to those operations.
Most professional services firms will also be affected through their interactions with banks and other financial institutions, and these firms - even if temporarily exempt - may have as little as a year to build capability and systems to meet what is likely to be their biggest operational change in decades.
We have identified a range of areas in which the new legislation will affect many professional services firms businesses immediately. The combined effect on some firms may be to materially raise their risk profiles.
Is there any evidence that professional services firms are really at risk?
Yes. Criminals seek out the involvement of lawyers, accountants and real estate agents in their money laundering activities. The skills of these professionals are often useful, and may even be required to structure or complete certain transactions.
Recent trends over the past decade has seen a marked increase in the sophistication of methods employed by money launderers and terrorist financers; with complex financial transactions, large scale property acquisition and cross border activity requiring specialist assistance.
The global spread of more effective supervision of legitimate businesses traditionally used by criminals - such as banks, casinos and money remitters - has further increased the pressures on professional services firms as criminal networks transfer their attention to remaining weak links.
The benefit for professional services firms keen to protect their businesses from involvement in criminal activity (and the attendant risk of financial sanctions and reputational damage) is that they can draw on a growing body of methods, techniques and 'typologies' that criminals use to target lawyers, accountants and real estate agents. Identifying the key red flags that relate specifically to the parts of your business most susceptible to money laundering and terrorist financing risk is a vital first step in the process of informing and educating staff; and a first defence in deterring and detecting the risks facing your business.
Lawyers and other professionals as active members of our community
New Zealand police are making the transition from reactive to proactive (as outlined at About AML CFT under the heading "What are the new laws really about"). The real question then, is the extent to which lawyers will also do so, in accordance with their overriding duties as officers of the court and core professional obligations to facilitate the administration of justice and uphold the rule of law. Similarly for accountants and real estate agents.
As professionals in our own communities, do we fight to maintain or extend the 'sanctioned loophole' of a temporary exemption to the law that lets us turn a blind eye? Do we wait until the exemption is removed before even starting to try and understand vulnerabilities that mean our own businesses might inadvertently be used to further criminal activity? And do we really think that if up to as much as $40-100 million is being laundered each week that our business has never and could never be used in this way?
Opportunity to build capability early
Many exempt businesses will choose - for reasons of prudence, best practice, reputation or competitive advantage - to begin incorporating some of the capabilities that are becoming standard New Zealand business practice.
Banks had more than three years to prepare. Professional services firms potentially have as little as another year or so to prepare for the biggest change to their operations in decades. Realistically it may be longer, but the law has been in place since 2009.
Financial institutions must comply in the full glare of regulatory oversight. Exempt businesses have the benefit of a brief window of opportunity to build AML/CFT awareness, expand operational capabilities and ensure no hidden surprises before mandatory reporting and regulatory supervision applies to their operations.