Anti-Money Laundering and Countering Financing of Terrorism Act

What does this mean to buyers and sellers? 

All real estate agents will have to conduct anti-money laundering and countering financing of terrorism customer due diligence on all clients (seller/buyer). Due diligence for the seller must be carried out before the real estate agent enters into an Agency Agreement with the client (seller). This means that we will start requesting information and documentation, that we have not previously requested, which identifies and verifies the legal beneficial owner(s)/real person(s) details.

A beneficial person is any entity that has an interest in the property. This is someone who has effective control of the seller, someone on whose behalf a transaction is being conducted, or - in the case of a company - someone who owns a 25% or greater share of the property being transacted. 

So, If you are thinking about selling your current property or investing in new property in 2019, then you need to know more about the AML and Countering Financing of Terrorism (CFT) Act.

What is AML and why is it needed?

The AML Act requires businesses like Barfoot & Thompson to put preventative measures in place to help tackle money laundering and financing of terrorism. These anti-money laundering and countering financing of terrorism (AML/CFT) measures help us to stop crime and safeguard our reputation as one of the least corrupt nations in the world, and a good place to do business.

Phase 1 of the AML/CFT Act has been in force since 2013. It applies to banks, casinos and a range of financial service providers. Phase 2 is now being rolled out and requires lawyers, conveyancers, accountants, real estate agents, sports and race betting, and businesses trading in high value goods to start implementing compliance from January 2019.

What does this mean to you ?

Under the AML Act, a customer is classified as our vendor /seller. So if you decide to sell your property from January 2019, we will be required to conduct customer due diligence (CDD) as well as customer identification and verification.

Similarly if you are are increasing your property portfolio through the purchase of a new property, then your lawyer will conduct the required CDD. 

Unpacking Customer due diligence (CDD).

When engaging with you, our agent must establish the following:

1. The full legal name(s) of the ‘beneficial owner(s)/real person(s)’ selling the property.
2. If the property is being sold by a Trust, then all of the Trustees are considered to be ‘beneficial owner(s)/real person(s).’
3. If the sale is by a Company, then the agent must identify who in the Company owns a 25% or greater share, they are the ‘beneficial owner(s)/real person(s).’
 
Once the agent has established who the ‘beneficial owner(s)/real person(s)’ are, they will need to obtain documentation from each of these person/s to prove their identity. The following three identification options can be used:

Option 1: Photographic identification – some examples are a passport, a travel document, a firearms licence. The photographic identification must contain the name, date of birth, a photograph, and the signature of the named person.

Option 2: Non-photographic identification – some examples are a birth certificate or a citizenship certificate. For this option supporting identification that includes a photograph of the person named on the non-photographic documentation in the form of a driver's licence, an 18+ card, or an international driver’s license must also be provided. 

Option 3: A New Zealand drivers licence supported by a bank card, a gold card, or an IRD letter.

Verification of documentation - ‘Beneficial owner/real person’

When proof of identity documentation has been obtained from the ‘beneficial owner(s)/real person(s),’ the agent must take further steps to verify that the documentation belongs to that person. This can be achieved via the following: 

1. Face to face process
2. For New Zealand based persons, a certificate of verification from a trusted referee
3. For overseas based persons, a certificate of verification from a person authorised in 
    that country to take a statutory declaration.

Nature & purpose

The final step in the process is to establish from the vendor/seller the following information: 
1. Why they are selling the property
2. If they have sold or purchased other properties in the last 5 years
3. What they intend to do with the proceeds from this particular sale.  

The agent must also make a personal assessment of the vendor/seller and decide if further investigation for the reason/s of the sale are necessary.

Document recording