Recent changes to the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 means businesses and professional services will have to put preventative measures in place to help tackle money laundering and the financing of terrorism.

In simple terms, money laundering is how criminals disguise the illegal origins of their money using financial institutions to avoid detection by authorities and to protect the identity of those providing and receiving the funds. 

The new law now extends to include lawyers, conveyancers, accountants, real estate agents, sports and race betting, and businesses that deal in certain high value goods. It is being implemented in stages to give businesses time to prepare for the changes.

Due diligence

Phase 2 of the law change requires the above group of business and service providers to carry out what the Act calls “customer due diligence”. This means lawyers, conveyancers, accountants, real estate agents, and certain businesses are now required to identify any potentially suspicious activities, and verify certain information from customers and clients before they provide services.

On 1 July 2018, lawyers, conveyancers, and businesses that provide trust and company services were included in the changes. On 1 October 2018 onwards, accountants were required to comply, and from 1 August 2019, businesses trading in high value goods as well as sports and racing betting agencies will become subject to the new law.

As part of carrying out customer due diligence, these businesses and services must take reasonable steps to make sure the information they receive from clients is correct, and so they need to ask for documents that show this.

There are specific provisions in the Act which set out how and what type of personal information must be collected from clients and customers.

Lawyers, conveyancers, accountants, real estate agents, and some businesses are required to collect documents that confirm a person’s full name, date of birth, and address. Personal information such as the client or customer’s driver’s licence, birth certificate, and documents with the client or customer’s address is also required as part of this identity verification process.

Privacy Act

The Privacy Act recognises that other laws may require personal information to be collected, used and disclosed in specific ways. Section 7 of the Privacy Act says that if there is another piece of law which says that personal information must, shall or must not be used in a certain way, this will override the general provisions of the Privacy Act.

This means that the provisions set out in the new anti-money laundering law, which for example set out what type of information should be collected, will override the Act’s general provisions.

But section 7 isn’t a ‘get-out-of-jail free card’ for the businesses to avoid your obligations under the Act. If you’re collecting personal information from a client or customer as part of carrying out the customer due diligence process, it’s still important to collect that information from the client or customer directly where possible (principle 2) and that you’re taking reasonable steps to inform them of the reasons and purposes for collection (principle 3).

It’s also worth noting that you should consider how you’re collecting personal information, and that you’re making sure that you’re not doing this by unlawful means or means that are unfair or unreasonably intrusive (principle 4).

Use and disclosure

The new law also addresses when use and disclosure of information is permitted and sets out how records should be kept. These provisions resonate with principle 5, principle 9, and principle 11, but provide a more comprehensive tailored framework.

If the new anti-money laundering law does not specify how personal information should or should not be used in a certain way, then it’s important that you comply with the Privacy Act’s privacy principles. 

Guidance for compliance

A couple of agencies have produced guidance materials on the law change. The New Zealand Law Society has this guidance for law firms on what advice to give to clients and customers. The Ministry of Justice has published this useful good summary.

In answer to the question ‘friends or foes?’, the Anti-Money Laundering Countering Financing of Terrorism Act and the Privacy Act could perhaps be described as friends that meet for coffee from time to time, but both parties aren’t so close that they’re likely to remember the other’s birthday.

Image credit: Money laundering by Marco Verch via Flickr (Creative Commons)

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