Anti-money laundering law will have knock-on

Strict new legislation aimed at preventing ill-gotten gains to be used to purchase New Zealand property is set to come into force on January 1 next year, when the Anti-Money Laundering and Counter Financing of Terrorism Act comes into force for real estate agents.

Under the Act, all real estate agencies must carry out due diligence on vendors and — in some cases — buyers as well.

New Zealand has had laws in place for several years to tackle money laundering and the financing of terrorism. Initially, these laws required banks and other financial institutions to verify the identity of their customers. The requirements were extended earlier this year to include lawyers, conveyancers, trust and company service providers and accountants.

New Zealand’s real estate sector is the last piece of the property conveyancing jigsaw to be included in the law.

From January 1 next year, agents will need to verify that their clients are who they say they are. The Act also requires real estate agencies and sales personnel to monitor property transactions for unusual behaviour — and, if necessary, report suspicious activity to the New Zealand Police.

Agencies will be required to report annually to the Department of Internal Affairs on their compliance with the Act and will be independently audited every two years.

Bayleys Group general manager for legal and compliance, Caroline Williams, says that, generally, clients of real estate agencies simply need to be conscious that they will have to provide additional information.

“Agents will be asking to take copies of identification such as a passport or driver’s license, proof of address and, in some cases, verifying the source of a client’s funds or wealth. Where the client is a company or trust, verification also needs to be carried out on the individuals who own or control the client,” says Williams.

“Most clients will be familiar with similar checks already carried out by their banks or other professional service providers.

“As with those processes, the type and amount of information requested will vary according to the individual circumstances of the client who is doing business with us.

“The process will be relatively straightforward for an individual, but may take longer for those transacting through complex trust or company structures, or where parties are based offshore. It will be essential to take this into account when planning a new property deal.”

Williams says the new rules dictated that even those clients who had used an agency’s services before may be asked to confirm their identity again.

“With other professions, including lawyers and conveyancers, also having to carry out checks, vendors and purchasers may find they have to tackle verification procedures more than once for a single transaction,” she says.

“Bayleys recommends talking to your agent as early as possible and getting the paperwork started.”

Williams says Bayleys’ sales teams have had training outlining the ramifications of the new anti-money laundering requirements “so they can guide clients through all the necessary checks, helping to minimise unnecessary delays or complications.”

Williams says the required documentation for proving identity can vary depending on the vendor’s legal status.

● Individuals will be required to show a passport, NZ firearms licence, or NZ driver licence along with another document such as a bank statement. Individuals will also need to provide a document showing their residential address — such as a local council rates bill or utility bill.

● Trusts will be required to show their trust deed and proof of identity and address for all trustees along with information regarding the trust’s source of funds or wealth. Additional information may also be required to verify beneficiaries.

● Companies will be required to show details of formation and registration. Any shareholder with more than a 25 per cent shareholding, or individuals with effective control of the company, such as directors, will need to be verified. Information regarding the source of company funds may also be required in some cases.