WHEN SHOULD WE START PREPARING?
Practical advice for New Zealand professional services firms
Practical advice for New Zealand professional services firms
How much time is on our side?
Even exempt business are already affected; at the very least, these businesses should address the immediate risks facing their operations. See Does it Affect Me Now?
The next issue is how long firms will have to prepare for the laws that will begin to apply directly to their own businesses.
Banks and financial institutions had three years to prepare, from 2009 to 2013. Many were scrambling to be ready by 30 June 2013. The regulators had longer, and were themselves reportedly seriously stretched for resources.
For New Zealand's temporarily exempt businesses, officials have brought forward the policy work for including their operations. This will involve consultation, and its shape may be affected by voluntary codes and practices, but at its simplest could involve simply removing the transitional exemption. Professional services firms may have only a year or so to prepare for the biggest operational change to their businesses in decades.
A big deal?
English research in the months leading to implementation found that 68% of law firms and 61% of accounting firms had already invested in staff training resources, and 48% and 33% respectively had hired additional staff to perform due diligence checks. Afterwards, many indicated they believed they
hadn't done enough to prepare. Anecdotally in June 2013, the New Zealand figures may be less than 10%.
Two years after implementation of English AML CFT regulations an official survey of top 100 firms revealed the level of ongoing costs. Those firms' easily quantifiable 'core' compliance costs - excluding their other less easily quantifiable costs - ranged to more than £1 million annually, with an average cost of £310,000, per annum, per firm. New Zealand's regulations differ, yet the level of endeavour required should not be underestimated. New Zealand's finance businesses reportedly spent between $70-230 million preparing their businesses for the new regulations, excluding on-going compliance costs.
Anecdotally in June 2013 when the new laws came into place for financial institutions, we were aware of very few New Zealand professional services firms that had even allocated budget to address these issues.
Reputation risk trumps financial
In England, lawyers and accountants reported that their main concern was the reputational risk of non-compliance - 38% and 49% respectively - followed by the financial risk of fines.
In New Zealand, penalties include fines up to $5 million and up to 2 years imprisonment. Offences can be committed knowingly or recklessly, such as closing your eyes to the issues; wilful blindness can result in prosecution as if you had the knowledge you tried to shield yourself from by not asking questions in the face of known 'red flag' indicators. An offence can be committed even for transactions that comply with the legislation, by structuring transactions to avoid application of AML/CFT requirements.
Even exempt business are already affected; at the very least, these businesses should address the immediate risks facing their operations. See Does it Affect Me Now?
The next issue is how long firms will have to prepare for the laws that will begin to apply directly to their own businesses.
Banks and financial institutions had three years to prepare, from 2009 to 2013. Many were scrambling to be ready by 30 June 2013. The regulators had longer, and were themselves reportedly seriously stretched for resources.
For New Zealand's temporarily exempt businesses, officials have brought forward the policy work for including their operations. This will involve consultation, and its shape may be affected by voluntary codes and practices, but at its simplest could involve simply removing the transitional exemption. Professional services firms may have only a year or so to prepare for the biggest operational change to their businesses in decades.
A big deal?
English research in the months leading to implementation found that 68% of law firms and 61% of accounting firms had already invested in staff training resources, and 48% and 33% respectively had hired additional staff to perform due diligence checks. Afterwards, many indicated they believed they
hadn't done enough to prepare. Anecdotally in June 2013, the New Zealand figures may be less than 10%.
Two years after implementation of English AML CFT regulations an official survey of top 100 firms revealed the level of ongoing costs. Those firms' easily quantifiable 'core' compliance costs - excluding their other less easily quantifiable costs - ranged to more than £1 million annually, with an average cost of £310,000, per annum, per firm. New Zealand's regulations differ, yet the level of endeavour required should not be underestimated. New Zealand's finance businesses reportedly spent between $70-230 million preparing their businesses for the new regulations, excluding on-going compliance costs.
Anecdotally in June 2013 when the new laws came into place for financial institutions, we were aware of very few New Zealand professional services firms that had even allocated budget to address these issues.
Reputation risk trumps financial
In England, lawyers and accountants reported that their main concern was the reputational risk of non-compliance - 38% and 49% respectively - followed by the financial risk of fines.
In New Zealand, penalties include fines up to $5 million and up to 2 years imprisonment. Offences can be committed knowingly or recklessly, such as closing your eyes to the issues; wilful blindness can result in prosecution as if you had the knowledge you tried to shield yourself from by not asking questions in the face of known 'red flag' indicators. An offence can be committed even for transactions that comply with the legislation, by structuring transactions to avoid application of AML/CFT requirements.