Rules of engagement

Rules of engagement

Total Property - Issue 8 2018

From 1 January, all real estate agents will be obliged to carry out new identity checks of clients under the Anti-Money Laundering and Counter Financing of Terrorism Act (AML/CFT).

New Zealand has had laws in place for a number of years to tackle money laundering and the financing of terrorism. Initially, these laws required banks and other financial institutions, among others, to verify the identity of customers and clients. The requirements were extended earlier this year to include lawyers, conveyancers, trust and company service providers and accountants.

In a measure designed to prevent the use of property transactions as a means of laundering funds, the Government is now further broadening these requirements to include the real estate industry.

From January 2019, all New Zealand real estate agencies will have to carry out due diligence on their clients under the Act to ensure clients are who they say they are, as well as monitoring transactions for unusual behaviour and reporting suspicious activity to the Police.

Agencies will report annually to the Department of Internal Affairs and their AML/CFT procedures will be independently audited every two years.

What will the changes mean for traders of commercial property?

Bayleys Group general manager, legal and compliance, Caroline Williams, says that, generally, clients of real estate agencies will simply need to be conscious that they will have to provide some extra information.

Under the AML/CFT Act, all real estate agencies must carry out due diligence on vendors and – if the agent is acting as a buyer’s agent – the buyer.

This involves collecting copies of identification such as a passport or driver’s license, proof of address and, in some cases, verifying the source of a client’s funds or wealth. Where the client is a company or trust, verification needs to be carried out on the individuals who own or control the client.

“Most clients will be familiar with similar checks already carried out by their banks or other professional service providers. As with those processes, the type and amount of information requested will vary according to the type of customer who is doing business,” says Williams.

The process will be relatively straightforward for an individual, but may take longer for those transacting through complex trust or company structures, or where parties are based offshore.

The new rules dictate that even those who have used an agency’s services before may have to be asked to confirm their identity.

“While the process will be fairly simple for many, identity verification may take days, and even weeks if a trust or company is involved, so it will be essential to take this into account when planning a new property deal.

“With other professions, including lawyers and conveyancers, also having to carry out checks, many vendors and purchasers will find they have to tackle verification procedures more than once for a single transaction.

“Talking to your agent as early as possible and getting started with the paperwork will help ensure the process goes as quickly and smoothly as possible – so you can focus your attention on achieving the best possible property deal.”

Williams says agents are being specially trained so they can guide clients through all the necessary checks, helping to minimise unnecessary delays or complications.

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