21 Nov Anti-money laundering. What does it mean for buyers and sellers in the Real Estate market?
What is money laundering?
Simply put, money laundering is the process by which criminals conceal the origins of money obtained by illegal activities, typically by funnelling money through legitimate businesses or money transfers. The aim is to make money obtained through illegal activity look like it has come from a legitimate source, thus allowing ‘dirty’ money to enter financial systems undetected.
What is happening in New Zealand to counteract Money-laundering, and why?
Each year, a staggering $1.35 billion from the proceeds of illegal activities is laundered through legitimate New Zealand businesses. In order to maintain New Zealand’s global reputation as a safe place to do business, and to tackle money laundering and prevent the financing of terrorist activities, the New Zealand Government is putting in place The Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) Amendment Act 2017.
The new laws extend the current AML/CFT Act to cover more businesses – including real estate agents and conveyancers – real estate is often used by criminals as a way of converting money from illegal activities into legitimate assets.
When do the changes come into effect?
From the 1st of January 2019, real estate agents will have to comply with increased measures when representing a buyer or seller – some of which means they will require additional information from you, their clients. In reality, the new safeguards will soon become the ‘new normal’, however in the short term it is worthwhile knowing that your chosen real estate agent isn’t asking for additional information to be difficult, they simply are complying with the new legislation and may suffer severe penalties for not doing so.
On an ongoing basis, agents will be;
- verifying the identity of their clients. This means your agent will be asking to see your passport, or two alternative forms of ID (Drivers License and Credit Card for example). It should be noted that one form of ID must have a photograph.
- Verify the identity of property purchasers who pay cash deposits of $10,000 or more. In some circumstances (for example in the case of companies or trusts), your agent may require you to provide bank statements or information to show source of wealth/funds, as well as verifying other people (company directors, other trustees) involved.
What happens if I don’t wish to provide the requested information (ID, source of wealth/funds) to my agent?
If your real estate agent is unable to complete the required customer due diligence, then they are unable to onboard you as a customer, and the agency agreement cannot proceed.
What happens if I don’t have a passport, and I don’t drive?
For customers who may not have the required identification documents, your agent will put in place exception handling procedures. Exception handling will only be used where the customer legitimately does not have the documents (for example young people), and will involve an agency Compliance Officer and Senior Manager making the approval – clearly documenting the reasons for the exception.
What if I am a non-NZ resident customer?
You will still need to provide the same information, and certified copies will be required following local laws. For example if a Justice of the Peace is accepted as a valid certification method in the overseas country where you are living, then this will be acceptable. From there it can be emailed and the listing can go forward. However original documents must still be posted and filed on arrival.
My real estate agent is requesting to take a photo of my ID using a mobile App. Is this legitimate?
If the agent you are dealing with is using AML Solutions, then they will have downloaded an App for the collection of ID verification. This information is scanned and sent to the secure AML Hub. It is not at any time stored on your agents’ phone. The AML Hub is secure and a select number of people have access to it. The information is compiled and allows your agents business to have a compliant AML/CFT programme.
If It’s all too hard, should I just go to another agent?
Please remember this is a change to Government legislation, so from 1st January 2019, all Licensed New Zealand real estate agents must comply with the new law. In order to open an NZ bank account you must identify yourself, and going forward the purchase or sale of property will require this also.
Source: Ministry of Justice Website https://www.justice.govt.nz/justice-sector-policy/key-initiatives/aml-cft/
Disclaimer: The material and information contained herein is for general information purposes only and is not intended to form professional legal advice. Harcourts Group Ltd does not accept liability for any claim or other action that may arise directly or indirectly from the use or reliance on the material and information herein. Harcourts Group Ltd recommends you seek independent legal advice if you are unsure of your legal position.