1. Compliance
  2. AML/CFT
  3. FAQs

FAQs

 

Money laundering basics

What is money laundering?

What is terrorist financing?

New Zealand’s AML/CFT regime

When did it all take effect?

What are regulations, codes of practice and guidelines?

What is a risk assessment?

What is an AML/CFT programme?

Is there a template available for the risk assessment and AML/CFT program?

What is a designated business group (DBG)?

Supervisors

How do you know who is your supervisor?

What happens if you come under two supervisors?

Is there a register of reporting entities?

What is a ministerial exemption?

Obligations

What obligations will be placed on firms?

Customer due diligence (CDD)

What is customer due diligence (CDD)?

What is ongoing customer due diligence?

What are politicaly exposed persons (PEPs)?

What if someone doesn’t have a passport and they don’t drive?

What happens if I take over an existing customer base?

Do we have to identify a customer every time they put in $20,000?

If a trust is a discretionary trust and the beneficiaries are not named, how do we do customer due diligence on beneficiaries?

Will you be providing a list of politically exposed persons (PEPs)?

Verification

What if someone doesn't have a passport and they don't drive?

If someone sets up a company and then asks you to set up an account providing a certificate of incorporation, is the Companies Office CDD enough?

Can we use the IRD B2B messaging as a verification procedure for KiwiSaver?

Can a financial adviser certify an original document?

Can a reporting entity accept an electronic copy of documentation certified by a trusted referee under Part 2 of the Amended Identity Verification Code of Practice 2013?

AML/CFT compliance officer

Can one person be the compliance officer for a designated business group (DBG)?

Can an AML officer be an external appointment?

What level of seniority does the AML/CFT compliance officer have to hold?

Suspicious transaction reports (STR’s)

Is there a protection from breach of privacy under the Act for people who submit STRs?

Should we inform on a client?

Does every STR report need to go directly to the Police Financial Intelligence Unit and not through supervisors?

Do we report suspicious persons?

Independent audit of risk assessment and AML/CFT programme

When exactly do I need to have my audit completed by?

Why does the Act require an audit report to be done on a two yearly basis?

What period should my audit report cover?

Does the FMA have a list of recommended auditors?

How do I know if the auditor is suitably qualified to conduct the audit?

How can I ensure the auditor is independent?

What response can I expect from the FMA if my auditor identifies issues?

Can I apply for an exemption from having an AML/CFT audit performed?

Can I apply for an extension for an AML/CFT audit report?

Do I need to have an audit performed if my business is being wound up within two years of my last audit?

Registered financial advisers (RFAs)

I am an RFA operating through a New Zealand registered company. I sell KiwiSaver and some other category 1 products, but these sales amount to as little as 2% of my business. Am I a reporting entity under the Act?

I am an RFA employed by a company that sells category 1 and category 2 products. Am I a reporting entity?

I am a ‘one man band’ RFA selling risk-based insurance and some category 1 products, mainly KiwiSaver. Am I a reporting entity?

I am an RFA who sells some category 1 products through a company so I realise that I am a reporting entity under the Act. Do I have to prepare a risk assessment and AML programme for my whole business?

Trading transferable securities

I trade carbon credits for my own account as part of my business. Does this make me a reporting entity under the Act?

Issuers and participants in securities issues

I am an issuer of securities registered on the FSPR. Am I a reporting entity under the Act?

I am an issuer of equity securities. The only financial service I provide in relation to the securities is to act as the issuer under section 5(i) of the FSP Act. Am I a reporting entity?

I am an issuer of debt securities, am I a reporting entity?

We have a special purpose vehicle SPV that issues debt securities in the ordinary course of business, on whom should it complete CDD?

We have a SPV that issued debt securities before 30 June 2013, but has no intention of issuing further securities. Is it a reporting entity under the Act?

If an issuer of securities has conducted CDD on the initial purchasers of their securities, do they have to conduct CDD on all subsequent people who purchase the securities in an independent secondary market?

Are crowd funding service providers and peer-to-peer lending service providers reporting entities?

Funds and fund managers

I am a fund manager, am I a reporting entity?

Investment companies

I run an investment company that invests funds on its own behalf. How could it be a reporting entity under paragraph (xi) of the definition of financial institution?

We have a pooled investment vehicle structured as an investment company and a separate investment manager. The investment manager is a reporting entity under the Act, will the investment company also be a reporting entity?

Our investment company is a reporting entity and has shares traded in the secondary market. Do we have to identify people who purchase shares in the secondary market?

Exclusions and exemptions

Can I rely on regulation 20 (exclusion: lawyers, etc) of the AML/CFT (Definitions) Regulations, as amended, if I undertake other relevant activities in addition to those described in regulation 20?

Am I exempt from the AML/CFT Act under regulation 16 (relevant services provided to related entities) of the AML/CFT (Exemptions) Regulations, if my only customers are related entities?

Supervision in relation to AML/CFT

How does FMA supervise AML/CFT?

Is it just the same as Australia?

Completing your annual AML/CFT report

General information about completing your annual AML/CFT report

Specfic information more relevant for advisers and adviser businesses

How to submit your report

 

Money laundering basics

New Zealand’s AML/CFT Regime

Supervisors

Obligations

Customer due diligence (CDD)

Verification

If someone sets up a company and then asks you to set up an account providing a certificate of incorporation, is the Companies Office CDD enough?

Not on its own. The Companies Office does some CDD, but your obligations under the Act amount to a higher level of CDD than the Companies Office carries out.

Can we use the IRD B2B messaging as a verification procedure for KiwiSaver?

The IRD B2B messaging can be used in lieu of a statement issued by a government agency required in para 3(f) of the Amended Identity Verification Code of Practice 2013. This can only be used for KiwiSaver.

Can a financial adviser certify an original document?

No. Financial advisers cannot certify identity documents. The code of practice contains a list of trusted referees who can certify identity documents. A reporting entity does not have to comply with the provisions of a code of practice, but if they don't intend to comply they must notify their supervisor in writing in advance and must comply with the relevant obligation by an equally effective means.

Although a financial adviser is not a trusted referee under the code, a financial product provider may rely on a financial adviser, who is also a reporting entity, to conduct CDD on their behalf in accordance with the conditions set out in section 33 of the Act. Alternatively, they may appoint a person as an agent to conduct CDD on their behalf in accordance with section 34.

This is different from certifying identity documents as a trusted referee under the code.

The product provider remains responsible for the CDD conducted on their behalf unders33 or by an agent under s34.

Can a reporting entity accept an electronic copy of documentation certified by a trusted referee under part 2 of the Amended Identity Verification Code of Practice 2013?

This depends on whether the electronic copy of the document meets the requirements for an electronically signed document under section 22 of the Electronic Transactions Act 2002 (ETA). A fax or pdf scanned copy of the trusted referee's signature will not be sufficient for the purposes of the code and cannot be accepted in place of the trusted referee's original certification.

For practical reasons, reporting entities may start to set up a client's account based on a fax or scanned copy of certified documents, provided the originals are forwarded by post and are received before any transactions are undertaken. Alternatively, if a reporting entity chooses to rely on electronically certified documentation in accordance with the ETA, the reporting entity will need to ensure that the trusted referee's electronic signature reliably identifies the trusted referee and their approval of the original document.

Section 24 of the ETA provides an example of the type of electronic signature that would be presumed to be sufficiently reliable. Reporting entities are not obliged to accept documents signed by an electronic signature unless they choose to do so.

AML/CFT compliance officer

Can one person be the compliance officer for a designated business group?

Yes, provided that the person is employed by at least one of the DBG members he or she administers and maintains all of the members' AML policies, as well as reporting to a senior manager of each reporting entity that appointed him.

Can an AML Officer be an external appointment?

Only if a reporting entity has no employees.

What level of seniority does the AML/CFT compliance officer have to hold?

The AML/CFT compliance officer has to report to a senior manager of the reporting entity.

Suspicious transaction reports (STR's)

Is there a protection from breach of privacy under the Act for people who submit STRs?

Yes, section 44 of the Act protects anyone who properly reports a suspicious transaction to the Police Financial Intelligence Unit.

Should we inform on a client?

Under the Act restrictions in the Privacy Act, legal professional privilege and other similar provisions do not extend to suspicious transactions. This is also the case under the Financial Transactions Reporting Act 1996. Under section 40 of the AML/CFT Act reporting entities must report STRs where there are reasonable grounds for suspicion.

Does every STR report need to go directly to the Police Financial Intelligence Unit and not through supervisors?

STRs must go to the Police Financial Intelligence Unit, not to your supervisor.  However, under section 41 of the Act, STRs must be signed by a person authorised by a reporting entity to sign them.  This could mean that STRs will be sent to the Police Financial Intelligence Unit via compliance or AML officers rather than directly from the person generating the STR.

Do we report suspicious persons?

STRs do not merely relate to transactions either completed or attempted.  The integral component of the STR is suspicion. It is therefore subjective and composed of many factors which may be relevant to include in an STR.  These include: the person sending or receiving the transaction; their behaviour; the time; the place; the amount; implausible sounding stories; the involvement of countries of interest; the transaction type; and the presence of recognised money laundering typologies.

Independent audit of risk assessment and AML/CFT programme

Refer to the following guides and reports for more information:

The FMA recently visited us to examine our AML/CFT compliance. Does that count as an AML/CFT audit?

No.

When exactly do I need to have my audit completed by?

That will depend on when the financial activities of your business were first captured under section 5 of the Act or additional regulations. Consider the examples below:

  1. If your business was captured by the Act or regulations as at 30 June 2013, then your was due to be completed by 29 June 2015. This is regardless of when you formally implemented your AML/CFT compliance programme.
  2. If you are a new business and your financial activities were captured by the Act or regulations at a later date then you have two years from that date to have your audit completed.
  3. Thereafter, businesses have two years from the date of their last AML/CFT audit to have their next audit completed. For example, if your first audit report had a date of 29 June 215, then your next audit report date should be no later than 29 June 2017. 

Why does the Act require an audit report to be done on a two yearly basis?

This is to ensure that reporting entities have, and will continue to have, robust systems and processes in place to detect and deter money laundering and the financing of terrorism.

What period should my audit report cover?

The audit report will provide an opinion by the auditor at a point in time. To support the opinion the auditor will examine evidence stretching back from the audit report date. Most likely, the period will cover the time between your last audit and your current audit.

Does the FMA have a list of recommended auditors?

We do not have a list of recommended auditors. The Act requires the auditor to be independent and suitably qualified – refer to our monitoring reports for more information on this.

Businesses offering AML/CFT audit services include:

  • AML/CFT specialist consultant firms and individuals
  • specialist regulatory compliance consultant firms and individuals
  • audit and accounting firms
  • other reporting entities.

How do I know if the auditor is suitably qualified to conduct the audit?

You should expect that your auditor has the required expertise of the Act and its regulations. Your audit will be more effective if your auditor understands your industry and has audit experience. It is imperative you are comfortable with the auditor you appoint as we may request you to provide evidence your auditor is appropriately qualified. Please refer to our monitoring reports.

How can I ensure the auditor is independent?

Your audit report should confirm the auditor’s independence and any other services they may have provided to you in addition to the audit. The Act states that the person who conducts the audit must be independent, and not involved in the development of a reporting entities AML/CFT risk assessment, or the establishment, implementation or maintenance of its programme. Please refer to our monitoring reports for more information on auditor independence. You should record your consideration of the auditor’s independence as we may ask you to provide this to us.

What response can I expect from the FMA if my auditor identifies issues?

We expect most reporting entities will have compliance issues until their AML/CFT programme matures. The audit is an opportunity to identy those issues and correct them. If there are significant issues identified we encourage you to engage with us early to discuss the matter and to review the actions you propose to take. If we select you for a monitoring visit, we are likely to request a copy of your remediation plan and check your progress. In cases where significant issues are appropriately addressed we are unlikely to engage further.

Can I apply for an exemption from having an AML/CFT audit performed?

We are not in a position to grant a waiver or exemption from having an AML/CFT audit performed. 

Can I apply for an extension for an AML/CFT audit report?

Except when we have brought forward your AML/CFT audit on request, we are unable to offer extensions. 

Do I need to have an audit performed if my business is being wound up within two years of my last audit?

No. However, if there is some uncertainty when the business will close and it’s possible that it may extend beyond the two year period, we strongly recommend you have your audit completed.  If your business is still a reporting entity after two years from your last audit, then you must have it completed. 

Registered financial advisers

I am an RFA operating through a New Zealand registered company. I sell KiwiSaver and some other category 1 products (on the basis of a class service only and/or advice to wholesale clients only), but these sales amount to as little as 2% of my business.  Am I a reporting entity?

If you are arranging for your clients to buy category 1 products then your New Zealand registered company is a reporting entity under the Act. The amount of products you sell is immaterial.  It is also immaterial whether your clients are retail or wholesale clients.  If you provide a purely advisory service to your clients and are not involved in the supply of category 1 products to your clients, then you will not be a reporting entity under the Act.

If you have an agreement with a product provider to sell their category 1 products and you assist your client in the purchase by either providing an application form, helping the customer complete the form, collecting the identity information, or sending the form to the provider, then you are arranging the sale and will be a reporting entity under the Act.

I am an RFA employed by a company that sells category 1 products (on the basis of a class service only and/or advice to wholesale clients only) and category 2 products.  Am I a reporting entity?

If you are selling category 1 products, your employer is likely to be a reporting entity under regulation 16 of the Anti-Money Laundering and Countering Financing of Terrorism (Definitions) Regulations 2011.  As an employee of that reporting entity, you will be required to follow the AML/CFT policies and procedures set out by your employer.

I am a 'one man band' RFA selling risk-based insurance and some category 1 products, mainly KiwiSaver (on the basis of a class service only/or advice to wholesale clients only). Am I a reporting entity?

If you are an individual who operates in your own name and not through a company or other unincorporated body, then you will not be a reporting entity under regulation 16. If you operate under the umbrella of a company or unincorporated body (including a partnership, joint venture or trust), then even if you are the only adviser,  the company or unincorporated body will be a reporting entity and will be supervised by the FMA.

I am an RFA who sells some category 1 products through a company (on the basis of a class service only and/or advice to wholesale clients only) so realise that my company is a reporting entity under the Act. Do I have to prepare a risk assessment and AML/CFT programme for my whole business?

The risk assessment and AML/CFT programme only have to represent the part of your business that relates to the category 1 products you sell.

Trading transferable securities

I trade carbon credits for my own account as part of my business. Does this make me a reporting entity under the Act?

Carbon credits are not treated as securities for the purposes of the Act. This means that trading carbon credits will not make you a reporting entity under paragraph (vii) of the definition of 'financial institution'. You could still be a reporting entity if you invest funds in carbon credits on behalf of others or if you manage an individual or collective portfolio of carbon credits. It is also important to distinguish between carbon credits and derivatives linked to carbon credits. If you trade in derivatives linked to carbon credits then you will be a reporting entity under paragraph (vii) of the definition of 'financial institution'.

Issuers and participants in securities issues

I am an issuer of securities registered on the FSPR. Am I a reporting entity under the Act?

You are not automatically a reporting entity just because you are registered on the FSPR. You will be a reporting entity if you issue debt securities in the ordinary course of your business or if you participate in securities issues and provide financial services in relation to those issues. We have issued a guideline on issuers of securities and participants in issues to help you understand whether you are a reporting entity.

The provisions of the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (FSP Act) that determine whether an entity should be registered on the FSPR are not identical to the provisions in the AML/CFT Act that deal with whether an entity is a reporting entity. Although the purposes of the AML/CFT Act and the FSP Act overlap, the FSP Act has a wider purpose.

Some issuers may therefore need to register on the FSPR even though they may not be reporting entities for Act purposes and conversely some entities may be reporting entities even though they are not required to register on the FSPR.

I am issuer of equity securities. The only financial service I provide in relation to the securities is to act as the issuer under section 5(i) of the FSP Act. Am I a reporting entity?

You will only be a reporting entity entity if you are participating in securities issues and the provision of financial services related to those issues as defined under paragraph (viii) of the definition of financial institution or if you perform a financial service as defined in section 5 of the FSP Act, in addition to acting as an issuer of securities. 

If you only act as an issuer of securities and do not provide other financial services such as being a promoter, manager, financial adviser, broker or underwriter, then you will not be a reporting entity under paragraph (viii) of the definition of financial institution.  Theguideline on issuers of securities and participants in issues has been published to help issuers understand whether they are reporting entities or not.

I am an issuer of debt securities, am I a reporting entity?

An issuer of retail debt securities falls into the category of 'accepting deposits or other repayable funds from the public' under paragraph (a)(i) of the definition of 'financial institution' in the AML/CFT Act.  To decide whether you are a reporting entity, you must decide whether you issue debt securities to the public in the ordinary course of business.  The 'Interpreting ordinary course of business guideline' can help.

If you have a separate company or SPV in your group structure whose primary purpose is to issue retail debt securities, then issuing debt securities to the public would usually be in the ordinary course of business for that SPV. If, however, the SPV has not issued debt securities for a significant period of time and has no intention to issue more, then you may decide the SPV does not issue debt securities to the public in the ordinary course of business.  We cannot give definitive guidance on what 'a significant period of time' might be, because this will depend upon the nature of your business.

We have an SPV that issues debt securities in the ordinary course of business, on whom should it complete CDD?

A reporting entity, such as your SPV, must complete CDD on its customers, their beneficial owners and anyone acting on behalf of its customers.  This CDD must be completed before the issuance of the debt securities.  The customers of the SPV will be the people who purchase the debt securities directly from the SPV (primary market purchasers).

You would not normally need to complete ongoing CDD on people who may purchase your debt securities in the secondary market, because these people are not your customers and in most cases would not be beneficial owners of your customers.

We have an SPV that issued debt securities before 30 June 2013, but has no intention of issuing further securities. Is it a reporting entity under the AML/CFT Act?

No. We would expect that your SPV is not currently issuing debt securities in the ordinary course of business, even though some of its debt securities may still be traded in the secondary market.  If however, there is an intention to issue further debt securities in the future, then the SPV will be a reporting entity.  This would mean it would need to comply with the ongoing obligations under the Act such as appointing an AML/CFT officer, submitting an annual report and producing a risk assessment and AML/CFT programme.

Note that the analysis under the Act will not always be the same as that under the FSP Act, so an issuer may need to register on the FSPR even if it is not required to be a reporting entity for AML/CFT Act purposes.

If an issuer of securities has conducted CDD on the initial purchasers of their securities, do they have to conduct CDD on all subsequent people who purchase the securities in an independent secondary market?

No. The AML/CFT Act only requires a reporting entity to conduct CDD on customers; beneficial owners of customers; and people acting on behalf of a customer. An issuer of securities may be required to conduct CDD on the initial purchasers of its securities (for example if it is issuing debt securities, or issuing equity securities and providing financial services in relation to those equity securities, in the ordinary course of business) because those purchasers will be customers of the entity.

If someone purchases the securities in a secondary market that is independent from the reporting entity, and the entity does not have any other business relationship with the purchaser, then the purchaser does not become a customer simply by holding the securities. The reporting entity does not need to conduct CDD on that secondary market purchaser.

Where a reporting entity makes payments due under securities to a person who has purchased those securities in an independent secondary market, this will not in itself mean the purchaser is a customer of the reporting entity.  Payments could include interest instalments, dividends or a final redemption amount.  These payments on their own will not trigger an obligation to conduct CDD on the purchaser. 

However, if a reporting entity facilitates the purchase of its securities, or otherwise enters into a business relationship with the purchaser of those securities, then the purchaser would become a customer of the reporting entity.  In these circumstances the reporting entity should conduct CDD on the purchaser in accordance with the Act before entering into the business relationship unless an exemption applies.

Are crowdfunding platforms and peer-to-peer lendingers reporting entities?

Yes. Anyone who provides a crowdfunding platform or is a peer-to-peer lender, as defined in the Financial Markets Conduct (Phase 1) Regulations 2014 is participating in an issue of securities and providing a financial service in relation to those securities.  This means they will be a 'financial institution' under section 5 of the Act and they are therefore reporting entities.  They may also perform other financial activities that mean they fall within the definition of a financial institution, although this will not affect their obligations under the Act.  All investors and issuers (or all lenders and borrowers in the peer-to-peer context) using their services will be their 'customers' for the purposes of the Act.

Funds and fund managers

I am a fund manager. Am I a reporting entity under the AML/CFT Act?

In most fund structures we would expect the fund manager to be a reporting entity. The fund manager is likely to be 'managing individual or collective porfolios' (under paragraph (a)(ix) of the definition of a financial institution) and/or 'investing, administering, or managing funds or money on behalf of other persons' (under paragraph (a)(xi) of the definition of a financial institution).

In some fund structures, such as venture capital funds or property investment structures using an investment company, there may not be a fund manager conducting the activities described in paragraphs (ix) or (xi) of the definition of financial institution. It may be difficult to identify an individual entity that is conducting these financial activities.

In these circumstances you should consider whether the fund structure as a whole could be considered to be a legal arrangement under which the financial activities are conducted. It is useful to look at this from the investor's point of view to understand whether they would consider that they are receiving the services described in paragraphs (ix) or (xi). If the investor is receiving these financial services from the fund, then the fund entity that interacts with the investor would be a reporting entity.

Investment companies

I run an investment company that invests funds on its own behalf. How could it be a reporting entity under paragraph (xi) of the definition of financial institution?

You should consider the substance of your activities, rather than the legal form adopted. An investment company may be considered to be 'investing, administering, or managing funds or money on behalf of other persons' where, in substance, the investment activities are being conducted for the benefit of and in the interests of the underlying equity investors.

The fact that a company is investing funds for its own benefit does not prevent the conclusion that it is also investing funds for the benefit of its investors. A company that has the 'look and feel' of a fund or pooled investment vehicle is also likely to be a reporting entity under paragraph (ix) of the definition of financial institution ('managing individual or collective portfolios').

This does not mean that all companies that invest in and manage assets will be reporting entities. The vast majority of companies will not be reporting entities under paragraphs (ix) or (xi) and there is effectively a presumption that companies are not acting as a fund or pooled investment vehicle for their ordinary shareholders, but if a company has the look and feel of a fund or pooled investment vehicle then it will be a reporting entity.

At one end of the spectrum there are companies who actively manage assets as part of a non-investment business, for example power generation companies and milk producers. These types of companies would not be considered to be managing a portfolio for the purposes of the Act or undertaking their investments on behalf of their equity investors.

At the other end of the spectrum are investment companies that passively invest as a look-through vehicles for investors. These types of companies would be considered to be investing on behalf of their investors, and may also be managing a portfolio for the purposes of the Act. They would therefore be reporting entities.

Most companies will fall somewhere between the two ends of this spectrum, but only companies that 'look and feel' like a fund or pooled investment vehicle are intended to be reporting entities under these paragraphs. There is no single determining factor, but factors that may be relevant include:

  • The legal form of the relationship between an investor and the relevant entity and whether the rights, benefits and AML/CFT risks are analogous to an investment in a fund or other pooled investment vehicle
  • Whether there is a recognisable investment strategy for investing in a portfolio of assets
  • The employment structure of the entity, for example are the majority of individuals employed in assessing potential investments and divestments and related administrative roles?
  • The reasonable perceptions of investors, i.e. whether they would consider themselves to be investing in an asset class or portfolio, rather than investing in a business
  • The way the company describes and/or markets itself, for example references to the opportunity to make an investment in its portfolio
  • The nature of any assets invested in by the company. For example, are assets independent and unrelated or are they integral parts of a wider business?
  • Whether the way in which assets are held is similar to the way a fund or other pooled investment vehicle would be expected to hold assets
  • The active or passive nature of activities undertaken by the company in relation to its assets
  • The number of independent assets held
  • The frequency with which new equity funds are raised
  • The frequency of acquisition and divestment of assets

Other factors may also be relevant. If in doubt please contact us at aml@fma.govt.nz to discuss.

We have a pooled investment vehicle structured as an investment company and a separate investment manager. The investment manager is a reporting entity under the AML/CFT Act, will the investment company also be a reporting entity?

Each individual entity needs to be assessed against the definition of 'reporting entity' in the Act. Although you should consider each part of the definition of 'financial institution'paragraphs (viii), (ix) and/or (xi) may be most relevant. If you determine that your investment manager is conducting all relevant activities, rather than the investment company, then the investment manager will be a reporting entity and the investment company may not be a reporting entity.

However, this does not mean that the reporting entity can avoid conducting customer due diligence on the investors in your pooled investment vehicle. The investment company would be considered to be the facility through which the investment manager is conducting the activities and these activities would be considered to be conducted on behalf of the investors (see previous question and answer). The investors would therefore be 'customers' of the investment manager for the purposes of the Act.

Our investment company is a reporting entity and has shares traded in the secondary market. Do we have to identify people who purchase the shares in the secondary market?

We would not usually expect reporting entities to complete ongoing customer due dilegence on people who may purchase their securities in the secondary market. Secondary market purchasers are not customers of the reporting entity and in most cases would not be beneficial owners of customers.

If the reporting entity is on notice that the original person who purchased the securities in the primary market was actually acting on behalf of a subsequent investor, then the subsequent investor will be a 'beneficial owner' under the Act and the reporting entity must conduct customer due diligence on that beneficial owner, but we would not normally expect this to be the case.

Exclusions and exemptions

Can I rely on regulation 20 (exclusion: lawyers, etc) of the AML/CFT (Definitions) Regulations, as amended, if I undertake other relevant activities in addition to those described in regulation 20?

Yes, you may rely on regulation 20 to the extent that you carry out a relevant service in the ordinary course of one of the businesses listed in regulation 20. The inclusion of the word 'only' in paragraph 1 of the regulation is not intended to prevent reporting entities from obtaining the benefit of this regulation if they carry out other activities caught within the scope of the Act. If a reporting entity carries out other activities caught within the scope of the Act, then it's obligations will still apply to those other activities.

Am I exempt from the AML/CFT Act under regulation 16 (relevant services provided to related entities) of the AML/CFT (Exemptions) Regulations, if my only customers are related entities?

Regulation 16 of the exemptions regulations applies when 'the recipient of the service' is related to the person that provides the financial service. In most cases this will mean that a person is exempt from the Act if their only customers are related entities, however, in some cases the recipient of a service will be a third party who may have no contractual link to the person providing the service.

If a non-related person is the recipient of your financial service, then you will be a reporting entity. It is useful to look at this from the investor's point of view to understand whether they would consider they are receiving financial services as described in the definition of financial institution in section 5 of the Act.

Supervision in relation to AML/CFT

How does the FMA supervise AML/CFT?

FMA is committed to a risk-based approach in countering money laundering and terrorist financing. This means we allocate our resources and efforts to the areas where we perceive the greatest threat to our statutory objectives, in order to:

  • detect and deter money laundering and the financing of terrorism
  • maintain and enhance New Zealand's international reputation by adopting, where appropriate in the New Zealand context, recommendations issued by the Financial Action Task Force
  • contribute to public confidence in the financial system.

Criminals are increasingly flexible and innovative in their efforts to launder money and attempt to avoid detection. It is therefore important that our anti-money laundering responses are flexible, proportionate and cost-effective. These are the main characteristics of a risk-based AML/CFT regime.

Is it the same as Australia?

No. One of the policy drivers behind the legislation was trans-Tasman integration, but only where it is appropriate for New Zealand. The detail in the legislation and the Government's approach differs in a number of areas, so it is imperative that reporting entities fully understand their obligations under the New Zealand regime.

Completing your annual AML/CFT report

Click on any of the topics below to find answers about completing your annual AML/CFT report. If you can't find the answers you're are looking for please email us at aml@fma.govt.nz

IMPORTANT:  Changes to the way you submit your 2016 report

Due to changes in the questions this year and because we are in the process of improving our online submission portal, you will be required to submit your report using an editable PDF called the annual AML/CFT report submission form 2016 - not through an online portal like last year.

This means you do not need to send us a printed and signed copy of your report. However, you are required to save or print a copy of this report which the FMA may ask to inspect in the future.

To open the form, please follow the steps below - please note: you must have Adobe Acrobat Reader version ‘X (also known as version 10)’ or greater installed on your computer to edit the form. You can download the Reader for free from https://get.adobe.com/reader.

Instructions for submitting your report are included at the end of the form.

Microsoft Internet Explorer or Edge users:

1. Please RIGHT mouse - click on this link.
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If you experience any problems submitting your report or if you need help, please email us at aml@fma.govt.nz or call us on 0800 434 567.

Topics 

General information

Specfic information more relevant for advisers and adviser businesses

How to submit your report

General information 

Why do I need to submit an annual AML/CFT report?

All reporting entities (as defined in the Act) must prepare an annual report on their risk assessment and compliance programme under section 60 of the Act. This needs to be in the format set out in Schedule 2 of the Anti-Money Laundering and Countering Financing of Terrorism (Requirements and Compliance) Regulations 2011 and must be submitted to the relevant AML/CFT supervisor (a list of AML/CFT supervisors can be found here). Information from these reports will provide FMA with important information on our AML/CFT reporting entities and will help us:

  • understand the risk of money laundering and financing of terrorism activities in each reporting entity
  • ensure that information we have on our reporting entities is accurate and up-to-date
  • determine the best use of our resources.

When can I submit my annual AML/CFT report?

You should submit your report any time between 1 July - 31 August 2016. The dates are fixed because the information included in the report must include data up to and including 30 June 2016. 

Reports for the period of 1 July 2015 – 30 June 2016 must have been submitted to us by Wednesday 31 August 2016, in accordance with the Act. If you have not submitted your report then please make your submission using the annual AML/CFT report submission form 2016 as soon as possible.

What does the annual AML/CFT report cover?

The annual AML/CFT report covers five broad topics:

  • Part 1 – Business contact details and organisation structure
  • Part 2 – AML/CFT risk assessment and AML/CFT programme
  • Part 3 – Products and services, customers and channels
  • Part 4 – AML/CFT supervisor-specific questions
  • Part 5 – Compliance with exemptions

Schedule 2 of the AML/CFT (Requirements and Compliance) Regulations 2011 determines the content for the annual AML/CFT report.

PLEASE NOTE:  For questions 6.2.1 up to and including 6.2.74, the total percentage (%) should add up to 100%.

Can I submit a handwritten report or create my own annual AML/CFT report, based on the user guide or some other template?

No. We cannot accept reports based on individually designed templates. Submissions must only be made by completing and submitting our annual AML/CFT report submission form 2016. See instructions above about how to open and complete it.

Can I use a template provided by another supervisor (or anyone else) to complete my annual AML/CFT report?

No. You should use the template provided by your own supervisor. If we are your supervisor then submissions must be made using our annual AML/CFT report submission form 2016. See instructions above about how to open and complete it.

As a reminder, we supervise: issuers of securities, licensed supervisors, fund managers, brokers and custodians, financial advisers, derivatives issuers, DIMS providers and peer to peer lending and equity crowd funding service providers.

What happens if I don't submit an annual AML/CFT report?

If you do not submit a report, compliance action may be taken against you.

What happens if I supply false or misleading information?

Penalties may apply if false or misleading information is supplied.

Am I exempt from submitting an annual AML/CFT report?

If you have a full exemption from the AML/CFT Act, you do not need to submit a report. If you have a partial exemption, you may be required to submit a report. 

If you do not know whether you need to submit a report, please contact us at at aml@fma.govt.nz

Does each member of a designated business group (DBG) need to complete a separate annual AML/CFT form?

Yes. Each member of a DBG must complete a separate annual AML/CFT form, except as noted in Part Two (Questions 4-5) for reporting entities that are eligible members of a DBG.

If you are a member of a DBG, you may allow another member to answer Part Two on your behalf. However, please note that you are responsible for the information provided. If you are eligible, use the space provided in Part Two to specify this, together with the legal name and registered number of the member answering Part Two on your behalf. Then leave this part blank and go to Part Three. You are required to answer all other parts of the form.

What happens if my reporting entity doesn't have an FSP number do I still need to complete a report? 

You are required to have a FSP number to complete the report. 

I am registered on the FSPR to provide a number of financial services, but do not currently provide any. Do I still need to complete an annual AML/CFT report?

You are not a reporting entity unless you carry on some activity that falls within the definition of 'reporting entity' in section 5 of the AML/CFT Act. This includes activities that have been declared by regulations for people to be reporting entities. If you are not a reporting entity, then you do not need to complete a report.

I am overseas for an extended period of time so will have difficulty completing my AML/CFT annual report. May I have an extension beyond 31 August 2016 to complete the report?

FMA is not able to grant any extensions.

I sold my reporting entity 'entity 1' ? that was in scope for AML/CFT purposes - a few months ago to a separate reporting entity 'entity 2'. Entity 2 is in scope for AML/CFT and will complete an annual AML/CFT report.

  • Do I still need to complete an annual AML/CFT report for entity 1?

Reporting entities are required to submit a report. It does not matter whether the ownership of a reporting entity has changed. This means that entity 1 is still required to submit a report even though the ownership has been transferred. The new management of entity 1 will be responsible for making sure it submits its annual report based on the business it has conducted over the year.

  • When entity 2 completes its annual AML/CFT report, should it also include all of entity 1s business (ie for the full year regardless of when ownership passed)?

There is no requirement for entity 2 to include entity 1's business in entity 2's report. Each reporting entity can submit its own report. However, if it is more convenient, entity 2 could include all of entity 1's business within entity 2's report - in which case entity 1 would not need to complete a separate report.

  • Also what if entity 1 had simply stopped trading or stopped undertaking any financial activities which would bring it into scope of the Act after 1 July 2015 but before 30 June 2016?

If entity 1 has conducted activities that make it a 'reporting entity' (as defined in section 5 of the AML/CFT Act) at any point during the year, then it will need to complete a report.

 

Specific information more relevant for advisers and adviser businesses


See our quick guide "how to complete your annual AML/CFT report" to help small financial adviser businesses.

I am an AFA qualified to give advice for category 1 products but do not currently do so. I have no investment clients (KiwiSaver or other types of category 1 products). I work solely in the life, income, trauma, health and disability markets. Can you tell me if I am obliged to prepare an annual report?

The products you advise on do not require you to be an Authorised Financial Adviser (AFA) (even though you are qualified as one). Therefore, Regulation 16 of the Anti-Money Laundering and Countering Financing of Terrorism (Definitions) Regulations 2011 does not apply to you. This means you are not a reporting entity (unless you undertake some other activity that falls within the definition of 'reporting entity' in section 5 of the AML/CFT Act). If you are not a reporting entity, then you do not need to complete a report.

For further information please refer to Guide for small financial adviser businesses.

I am an advisory business that is only a reporting entity under the AML/CFT Act because of regulation 16 of the 'Definitions' regulations. I don't ever receive client money or client property. Do I answer 'zero' for question 6.1 of the annual AML/CFT report?

No. We don't believe a 'zero' response is correct. We are aware that some advisers have taken the view that, where no client money or client property goes through their own accounts, they have not "settled" any transactions themselves and therefore should submit "zero" for the number of transactions and "zero" for the value of transactions in question 6.1. However we do not believe this is the correct interpretation of the relevant provisions.

One of the advantages of providing us your report is that it is an efficient method of providing us with useful information on the AML/CFT risks faced by your entity without the necessity for direct contact with FMA. A 'zero' response will result in a lack of information to risk-assess the reporting entity. We may need to approach the adviser at a later date with a specific request for records, documents, or information under section 132 of the AML/CFT Act. We will take into account information we receive under the AFA information return (if applicable) when determining whether a request under section 132 is necessary.

Advisers are also reminded of their record-keeping obligations under section 49 of the Act and of their record-keeping obligations under the Code of Professional Conduct, which are additional to the section 49 requirements. We recommend adviser businesses put in place a system or process so the information requested can be provided easily for these reports.

When counting the number of transactions for the purposes of question 6.1 do adviser businesses only need to count new lump sum business?

No, a transaction includes any new arrangement where financial products are brought, sold or transferred. Each time an adviser helps arrange these transactions there is a small risk the adviser could be used to assist money laundering or terrorist financing.

To estimate the number of transactions for question 6.1 advisers should:

(A) Estimate the total number of new lump sum business transactions arranged in the year.
(B) Estimate the total number of new regular payment arrangements (or other non-lump sum deposits) set up in the year.
(C) Estimate the total number of new withdrawals arranged for clients (either lump sum withdrawals or new regular withdrawal arrangements) in the year.
(D) Estimate the total number of times the adviser has arranged for clients to transfer between financial products.

The estimates for (A), (B), (C) and (D) should be added together to get the estimate of the total number of transactions. We acknowledge that it may be more difficult to estimate the number of certain types of transaction, in which case you may choose to use the free text field in Part 6 of the report to describe how the estimate was reached. For example, if you can estimate (A), (B) and (C) to a reasonably high level of confidence, but your estimate of (D) is much less certain, then you can provide the separate details and say how you estimated each in the free text field in Part 6 of the form. 

When counting the value of transactions for the purposes of question 6.1 what do adviser businesses need to count?

To estimate the value of transactions for question 6.1 advisers should:

(A) Estimate the total value of new lump sum business transactions arranged in the year.
(B) Estimate the total value of new regular payment arrangements (or other non-lump sum deposits) set up in the year - You do not need to count regular payments that were set up in a previous reporting period unless you have arranged for the payments to be changed within the reporting period. Where new regular payments have been set up within the reporting period, please estimate the annual value of the regular payments (even if the regular payments were only effective for a part of the year).
(C) Estimate the total value of new withdrawals arranged for clients (either lump sum withdrawals or the annual value of new regular withdrawal arrangements) in the year.(D) Estimate the total value of transfers of financial products arranged for clients during the year. For example, a transfer of $1000 from ABC Limited to XYZ Limited arranged by the adviser would count as $1000.

The estimates for (A), (B), (C) and (D) should be added together to get the estimate of the total value of transactions. We acknowledge that it may be more difficult to estimate the number of certain types of transaction, in which case you may choose to use the free text field in Part 6 of the form to describe how the estimate was reached. 

I haven't kept count of the number or value of transactions in the way requested by question 6.1. Can I estimate the answer?

Yes. In determining the value and number of transactions during the year you only need to provide an estimate. This means we expect the submissions to be based on an approximate calculation or judgment of the value or number, rather than necessarily being an exact count of transactions and values.

When estimating the value of transactions for the purposes of question 6.1, should adviser businesses use the value of the transactions to their business or use the total value of the transactions themselves?

Use the total value of the transactions themselves, i.e. the value of the settlement between the client and other reporting entity.

Should an adviser business count transactions for the purposes of question 6.1 if the adviser gave financial advice to the client to do something, but didn't otherwise assist in arranging the transaction?

No. Advisers only need to estimate transactions where they have arranged for another reporting entity to provide a transaction.

How to submit your report

IMPORTANT:  Changes to the way you submit your 2016 report

Due to changes in the questions this year and because we are in the process of improving our online submission portal, you will be required to submit your report using an editable PDF called the annual AML/CFT report submission form 2016 - not through an online portal like last year.

This means you do not need to send us a printed and signed copy of your report. However, you are required to save or print a copy of this report which the FMA may ask to inspect in the future.

To open the form, please follow the steps below - please note: you must have Adobe Acrobat Reader version ‘X (also known as version 10)’ or greater installed on your computer to edit the form. You can download the Reader for free from https://get.adobe.com/reader.

Instructions for submitting your report are included at the end of the form.

Microsoft Internet Explorer or Edge users:


1. Please RIGHT mouse - click on this link.
2. Select ‘Save target as’. 
3. We recommend saving the form to your desktop. You are ready to complete the form.
4. To open it from your desktop, double click to open it in Adobe Reader.


Chrome or Firefox users:

1. Please RIGHT mouse - click on this link.
2. Select ‘Save link as’. 
3. We recommend saving the form to your desktop. You are ready to complete the form.
4. To open it from your desktop, double click to open it in Adobe Reader.

If you cannot access a compatible version of Adobe Acrobat Reader you will not be able to edit the form. Instead, please download to print the form, write in your responses and scan the form as a PDF file. Email the scanned completed form to us at aml@fma.govt.nz

If you experience any problems submitting your report or if you need help, please email us at aml@fma.govt.nz or call us on 0800 434 567.

Can I save my responses and go back to complete them at a later date?

Yes. You can save your report and go back into it at any time. When completing the form, we recommend you regularly save your responses.

Can I fill out the form in handwriting?

No.

What if I make a mistake on my submission? Can I resubmit a report?

Yes.  You will need to submit a new report. We will not make corrections for you, therefore please take the time to make sure your responses are correct prior to pushing the 'Submit Report' button. If you have any queries please see the user guide and these FAQs, alternatively contact us at aml@fma.govt.nz - but it is important you do this prior to submitting. If you identify an error after you have submitted you will need to resubmit the report.  We will ignore your first submission when analysing responses.

Filling in your form

The form is in sections. You can fill in the sections in any order and return to them at any time - for instance if you've still got questions to answer, or you want to change something.

The questions are a mix of narrative fields where you can explain something in your own words - and fixed questions where you are asked to answer either YES/NO, enter a value, or select from a list for example.

Need help?

If you experience any problems submitting your report or if you need help, please email us at aml@fma.govt.nz or call us on 0800 434 567.


 

This information does not constitute legal advice. Please consult the relevant statute and regulations and seek independent advice if necessary.