It Doesn’t Apply To Me
By Frank Lieshout | 6 min read
It’s time to talk again about those three (some say ‘dirty’) letters.
A, M, L
That’s right AML – Anti Money Laundering and the regulations that come with it.
In our previous article, we mentioned a number of objections we hear about complying with AML obligations and debunked these as myths.
That article then went on to bust the myth of the objection ‘There’s no consequence for not doing it, eh?’
In this article, we look at the objection of ‘It doesn’t apply to me.’
The basis of whether AML regulations apply to you, revolve around whether you provide any Captured Activities in the ordinary course of your business.
Under the AML/CFT Act (the Act), the types of businesses we are referring to are called Designated Non-financial Businesses or Professions, DNFBP for a shorter mouthful.
So what are Captured Activities?
The Department of Internal Affairs (DIA), which is the relevant AML regulator, has provided the following flowchart for guidance:
What does this mean in practical terms?
This depends on whether you are a Real Estate Agent, Conveyancing Firm, Law Firm, or Accounting / Bookkeeping Firm.
Real Estate Agents
It’s pretty clear-cut. Your relevant part is the reference to engage in and/or give instructions on behalf of a customer to another person in a transaction within the meaning of section 4(1) of the Real Estate Agents Act.
Basically, the main transactions are:
- the sale or purchase of a freehold estate or interest in land
- the grant, sale, or purchase of a leasehold estate or interest in land
- the grant, sale, or purchase of an occupation right agreement at a retirement village
- the sale or purchase of any business (with or without any interest in land)
This is all ‘bread and butter’ stuff of any real estate agent business. So you’re definitely included.
Also pretty clear-cut. Your relevant part is the reference to any conveyancing to effect a transaction. The main transactions are the first three above regarding real estate agents. Once again, stuff that is the basis of these types of businesses. Definitely included.
A lot of law firms are involved in conveyancing, so as noted above, they will be in. In our experience, a lot of law firms operate a trust account whereby they receive clients’ money (other than for conveyancing) and disburse it to stakeholders.
- Holding funds payable in disputes and paying them out
- Collecting funds for an estate and distributing them out
This would fall under the manage client funds …….. section. So, law firms that do this would be included as well.
Accounting / Bookkeeping Firms
Similar to a lot of law firms, a lot of accounting firms operate a trust account that handles clients’ funds. In addition, a number of accounting firms/bookkeeping firms pay bills on behalf of clients.
Some not only prepare wages for clients, they actually ‘push the button’ for the wages to be paid out of the client’s bank account. This can be directly within the client’s bank account or through payroll software like SmartPayroll whereby the accountant / bookkeeper makes the payment within the software.
Also, it is common for accounting firms to be a registered office for clients’ companies for example. This is a captured activity under Providing a registered office …….. section.
If you are an accountant / bookkeeper and still think you are not in, well here is the real kicker.
Currently, doing tax transfers for a client may be a captured activity! What a load of nonsense you say. And a number of professional bodies representing the industry agree. But not in the eyes of the powers that be i.e. the Government. An AML exemption application was rejected earlier this year, so the following DIA guidance (and firms’ resulting uncertainty) stands:
- tax transfers “may” be captured activities as either ‘managing client funds’ or ‘engaging in/giving instructions for a transaction in relation to creating, operating or managing a legal person/arrangement’.
After allowing for all those examples, most accounting firms, and at least some bookkeeping firms will be included.
As you can see, it is very hard, especially for accounting firms, not to be doing any captured activities and so be subject to the AML regulations.
If you haven’t already had your AML Audit completed, get in touch with us.