Client ID Verification
Anti-Money Laundering Implications
New Zealand is a target for money launderers. It is estimated that well over $1 billion a year is laundered through New Zealand businesses.
New Zealand introduced its Anti-Money Laundering and Countering Financing Terrorism (AML/CFT) legislation in 2009. The banks, financial institutions and a number of other sectors have been operating under the legislation since June 2013 and real estate agents are also captured under the legislation.
As of 1 January 2019, real estate agents are now legally required to verify the identity of their clients in accordance with AML/CFT legislation. This requirement is called Customer Due Diligence (CDD).
This essentially means they are required to identify who their clients are (i.e. who they are acting for). This could be individuals, companies, trusts or other client types such as societies and government departments, etc and means the licensee agent will need to ask for information to verify your full name, date of birth and residential address. This can be done in several ways but, not unlike the banks, they will ask to see identity documents such as your passport, driver’s licence, utility bill, bank statement, etc. In some cases, they will also have obligations to establish a client’s source of funds and wealth.
All real estate agents in New Zealand have legal obligations to comply with the AML/CFT legislation and will be requesting more documents and information from their clients than were required in the past.
We request that you please show patience and cooperate with your agent’s requests as these are procedures and obligations that have been introduced into the real estate sector and we are legally obliged to abide by them. Further, please note that if your real estate agent cannot verify your identity in line with the legislation, they may not be able to act for you.
More information about CDD is provided below.
Please note – If you are purchasing property you are not deemed a client of the real estate company (unless you have engaged them as a buyer’s agent), however, your lawyer also has AML/CFT obligations and may need to complete CDD. We encourage all purchasers to engage early with lawyers in any sale or purchase process. See ‘Documentation you may be asked for’ below for an outline of the type of documents that may be requested.
Who do real estate agents need to complete CDD on?
They must identify and verify:
- The client;
- Each beneficial owner of the client; and
- Each person acting on behalf of the client including the authority to act on behalf of the client e.g. a lawyer or representative giving instructions on someone’s behalf.
Who is a beneficial owner?
A beneficial owner is any individual (natural person) who satisfies one or more of following:
- The individual has effective control of the client; or
- The individual is a person on whose behalf a transaction is conducted;
- The individual owns more than 25% of the client or person on whose behalf a transaction is conducted (e.g. direct/indirect shareholders).
What is effective control?
Effective control is the ability to exercise control or influence over a company or entity. Typically, this will be the directors of a company or entity or those who hold senior positions. It could also be those who are funding the company, so this is something else that you will need to consider, and where relevant, enquire about.
What information will they need to obtain?
As a starting point, the following identity information must be obtained:
- The person’s full name;
- The person’s date of birth;
- If the person is not the client, the person’s relationship to the client;
- Any additional information prescribed by regulations.
This can be done in several ways but they will typically ask to see valid identity documents like your passport, driver’s licence, utility bill, bank statement, etc.
What is the nature and purpose of the business relationship?
Your real estate agent is also required to obtain information on the nature and purpose of the proposed business relationship with you, their client. This includes understanding what you are trying to achieve, how much business is expected and how regular your interactions will be.
Source of funds/wealth
In some cases the real estate agent will need to establish the source of the funds for the transaction (i.e. where the funds have actually come from) and source of wealth (i.e. how those funds got there in the first place and how that money was obtained)
Documentation you may be asked for
The below gives an indication of some of the documents your real estate agent may ask you to present in person or as certified documents as part of this process:
A current passport, NZ firearms’ licence or NZ driver’s licence with another document such as a bank statement or statement issued by a government agency. You will also need to provide a document with your residential address (for example, a utility bill and ban statement)
The Trust Deed and, for trustees, and settlors, the information required for individuals as noted above, together with information regarding the Trust’s source of funds or wealth. Additional information may also be required for beneficiaries. Information regarding source of funds or wealth may also be required.
Details of the company, together with the information for individuals noted above for every individual with more than a 25% shareholding, all individuals with effective control of the company and all individuals acting on behalf of the company. Information regarding source of funds or wealth may also be required.
The above list is not exhaustive and is indicative only. Your real estate agent will assist you with the specific requirements in relation to your situation. The information you will be asked to provide will vary depending on whether you are doing business as an individual or part of a partnership, company, public body, estate or trust.
Businesses are not doing this because they think you might be laundering money – they are doing it to help protect everyone and because they are required to do so under the law.
The New Zealand Ministry of Justice has also provided some information. Please see the link below:
The above material does not constitute legal advice and all aspects of the AML/CFT legislation and guidance must be considered and, if required, you should seek independent legal advice.
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