ANTI MONEY LAUNDERING LEGISLATION AND CLIENTS OF DUKESONS BUSINESS LAW

May 2018

The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT) applies to New Zealand law firms when doing certain kinds of work for clients from 1 July of this year. New Zealand law firms will have to take steps to mitigate and eliminate the risk of being used to facilitate money laundering or terrorist financing activities

The legislation has the lofty objective of ensuring that New Zealand is a safe place to conduct business with a reputation for low corruption and measures to prevent money laundering activity and the financing of terrorism.

You might ask what has this to do with you, given that I act only as a business lawyer in relation to orthodox business transactions. The powers that be would say that money laundering can occur when funds are processed via a law firm’s trust account to make them appear legal and legitimate. Similarly, the law aims to stop people in New Zealand who may finance terrorism. Money can be transferred towards terrorism by involving a law firm to avoid persons associated with terrorism from being caught by law enforcement and to hide their identities.

From 1 July 2018, all lawyers who undertake certain kinds of work for clients and prospective clients will have to undertake due diligence to verify the identities of their clients/prospective clients (including beneficial owners of the client and persons acting on behalf of the client/prospective client) and the legitimacy of the transactions. In some cases, the source of wealth and funding will also need to be ascertained.

It will be time consuming for Dukesons and for clients/prospective clients, and will be an additional exercise to lawyers having to send Client Care documents to prospective clients. Dukesons will have to undertake due diligence even on clients for whom it has acted for many years. In relation to prospective clients, due diligence would have to be completed before Dukesons could actually take the client on.

Given the nature of Dukesons Business Law clients and the kind of work that Dukesons undertakes for business clients, the legislation could be regarded as overkill (other law practices, especially those that undertake conveyancing and that set up companies and trusts may be different). However, the law has to be complied with. Dukesons Business law won’t be able to act for any client or prospective client if they refuse to allow Dukesons to carry out the due diligence.

Typical transactions that Dukesons Business Law undertakes for clients where customer due diligence will be required include:

  • Buying or selling a business;
  • Buying or selling shares in a company;
  • Drafting or vetting a Deed of Lease of business premises;
  • Incorporating companies (though Dukesons usually encourages clients to have their accountants do this in conjunction with getting IRD numbers, dealing with GST returns etc).

Other types of transaction are caught by the legislation but Dukesons doesn’t undertake them at all e.g. sale and purchase of real property (land or land and buildings), forming companies with nominee shareholders, setting up trusts, and accepting money for investment.

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Level 3, Achilles House, 8 Commerce Street, Auckland 1010. PO Box 946, Shortland Street, Auckland 1140.
Telephone: +64 9 379 4556 Mobile: 021 404 306. Fax: +64 9 379 4557 Email: steve@dukesons.co.nz