Third Party AML/CFT Customer Due Diligence (CDD)

Third Party AML/CFT Customer Due Diligence (CDD)

 

 

With the majority of phase 2 entities now entrenched in the regulations, many are grappling with the requirements around client/customer identification processes. 

The regulation do allow entities to outsource their CDD requirements based off section 33 and 34 of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (the Act).

Section - 33 Reliance on other reporting entities or persons in another country

Subject to the conditions as set out in the Act a reporting entity may rely on another person (who is not an agent) to conduct the customer due diligence procedures required under the Act or relative regulations.

Key points are:

1.    The person or entity is a reporting entity

2.    In a country with sufficient AML/CFT measures

3.    Has a business relationship with the same client

4.    Identity information is provided before business relationship established and within 5 days of the request

5.    The person or entity agrees to conduct the CDD

There are other conditions attached to section 33 and should be read in conjunction with the above.

 

 

The regulations also allow agents to be appointed as set out in section 34 of the Act.

Section - 34 Reliance on agents

Subject to any conditions that may be prescribed by regulations, a reporting entity may authorise a person to be its agent and rely on that agent to conduct the customer due diligence procedures and obtain any information required for customer due diligence under this Act or regulations.

In regard to section 34 of the Act a designated business group (DBG) may rely on members of the DBG to conduct CDD requirements.

Relying on another AML/CFT registered entity for CDD

If another entity also has a relationship with an entities customer, the entity may be able to rely on it to carry out CDD if that business agrees to. However, the entity can only rely on it if it:

a)  is also a New Zealand business or professional that has to comply with the AML/CFT Act, or is based overseas and has similar obligations in a country with sufficient AML/CFT controls;

b)  already has a relationship with the entities customer and has carried out CDD to the required standard; and

c)  can immediately give the entity its CDD documents when asked for.

This may be an option if the entity has an existing agreement or business relationships with other reporting entities. For example, a real estate agent and a conveyancer may agree that only one of them carries out CDD in a real estate transaction.

 

Use of third parties for electronic verification 

There are various companies in the market place that can assist an entity with its CDD requirements by the use of electronic means. The Amended Identity Verification Code of Practice 2013 Part 3 explains what is required for this method of CDD identification, in particular an entity must determine what type of electronic sources will be considered reliable and independent.

The type of CDD conducted varies with each company from the use of apps on a cell phone to platforms that incorporate all of the AML/CFT requirements including CDD and verification.

For more information please contact Remote Compliance by filling in the details on the contact tab.

IMPORTANT NOTE:

If an entity does outsource or obtains CDD from third parties, the entity is still responsible, not the person or company providing the information.

AML/CFT PHASE 2

Anti-Money Laundering and Countering Financing of Terrorism (“AML/CFT”) Phase 2

The long awaited Government changes (phase 2 ) that affects the AML/CFT laws is now well underway. The new entities listed are now required to put preventative measures in place to help tackle money laundering and financing of terrorism in New Zealand.

FMA SECTOR RISK ASSESSMENT 2017

In early July, the long awaited updated Sector Risk Assessment document has been released by the FMA after a six year gap from the original Securities Commission version back in 2011.

The following is an extract from the FMA website on the new document.

“We expect reporting entities to use our SRA 2017 as a guide when they prepare and implement their individual AML/CFT programmes.

The SRA 2017 is also intended to inform and assist others involved in AML policy-making and supervision, both in New Zealand and overseas.

AML/CFT AUDITS - ARE YOU COMPLIANT AND UP TO DATE?

It is coming around to the second round of audits under the AML/CFT Act 2009 (‘the Act”) requirements and as highlighted by one of the regulators (FMA) many entities have not actioned the audit to the required level. This is only one of the regulators; the same outcomes maybe also apply with the other regulators, in particular the DIA who have under their wing a very large entity base.

CONSULTATION ON PRESCRIBED TRANSACTION REPORTING REGULATIONS

The Department would like to draw your attention to the Ministry of Justice (the Ministry) consultation currently taking place on the Anti-Money Laundering and Countering Financing of Terrorism Amendment Act 2015 (the Act) prescribed transaction reporting regulations. The purpose of this consultation is to help inform the Ministry during the development of regulations for prescribed transaction reporting.