NFP Anti-Money Laundering and Countering Financing of Terrorism
Risks relating to Money Laundering or Financing of Terrorism
The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT) is intended to prevent money-laundering by criminals and the financing of terrorism. Societies and charitable trusts (“not-for-profits”) and those providing them with services (such as legal, accounting and banking) are affected by this legislation:
- The “risk profile” of a club or society will be assessed having regard to its purpose and size and whether it is a national or local entity. If the organisation has or will have a social or local community focus, such as a sporting or cultural group, the potential risk associated with it is likely to be low. If the club’s or society’s activities are likely to be cash-intensive (with greater potential for it to be used for the placement of illicit money) the risk will be assessed as being higher.
- The “risk profile” of a charitable trust is considered to be higher because of the potential for trusts to be used to disguise the criminal origin of funds or the true ownership and effective control of the trust, particularly where ownership and control arrangements are sophisticated or complex. As a result, all charitable trusts are subject to what is called “Extended Due Diligence,” and any charitable trusts that are geographically or financially linked to higher risk countries, or include politically exposed persons, may have increased Money Laundering or Financing of Terrorism risks.
Lawyers and Accountants Advising Not-for-Profits and Financial institutions providing Not-for-Profits with financial services
Before any lawyer or accountant provides a proposed or existing club, society or charitable trust with advice, the “risk profile” of that proposed or existing club, society or charitable trust must be assessed by that lawyer or accountant before providing that not-for-profit with any advice. Similarly, before a financial institution provides a not-for-profit with financial services its “risk profile” needs to be assessed.
A Lawyer’s Obligations when Advising Not-for-Profits
Most lawyers will now require detailed information about not-for-profit clients and the transactions undertaken on their clients’ behalf to ensure that a lawyer is not in breach of statutory obligations under the Anti-Money Laundering and Countering Financing of Terrorism Act. Please also note that if a lawyer has any suspicions about what that lawyer is asked to do for a not-for-profit entity the lawyer is obliged by the Act to report those suspicions.
Before I can provide legal services (with the exception of opinions) to new or existing not-for-profit clients what is called “customer due diligence” (CDD) is required and, in the case of charitable trusts, that is likely to require “extended due diligence.” This is already commonly required by a number of businesses (such as banks), and they are unavoidable obligations.
My “customer due diligence” requirements
Quite simply, the easiest way for me to comply with my obligations under the Anti-Money Laundering and Countering Financing of Terrorism Act is for me to be instructed by a solicitor who can certify to me that that solicitor has complied with the Act. That is the case for two primary reasons:
- I do not have the support staff who can attend to the “customer due diligence” work for me, and
- If I am doing work for a client who is not in the Hastings area the most efficient and practical way for me to comply with the Act is to have that client to see a lawyer located close to the client who can provide me with the required certificate.
Unless I am instructed by a solicitor who undertakes to me that the required “customer due diligence” has been undertaken and is current, I will need to complete the required customer due diligence. For existing not-for-profit entities it should usually not be unduly difficult to provide the required information, but for entities being formed some of the information may be rudimentary.
- Unless I am instructed by a solicitor who undertakes to me that the required “customer due diligence” has been undertaken and is current, for existing or proposed charitable trusts I need (if necessary, those items followed by an * can be obtained online by us):
- Full name of the trust,
- A copy of the constitution (Trust Deed) if already in existence*,
- If already formed and registered, a copy of the Certificate of Incorporation issued by the Registrar of Incorporated Societies* and confirmation of registration with Charities Services if already registered under the Charites Act 2005*,
- Legal status and purposes,
- Principal physical and postal addresses and any registered office address,
- Full names, proofs of identity, dates of birth, up-to-date proof of addresses for all trustees, and any other controllers of the trust and beneficial owners (if specified), and
- Source of funds or wealth of the trust.
- Unless I am instructed by a solicitor who undertakes to me that the required “customer due diligence” has been undertaken and is current, for existing or proposed clubs and societies I need (if necessary, those items followed by an * can be obtained online by me):
- Name of the club or society,
- A copy of the constitution if already in existence*,
- If already formed and registered, a copy of the Certificate of Incorporation issued by the Registrar of Incorporated Societies* and confirmation of registration with Charities Services if already registered under the Charites Act 2005*,
- Legal status and purposes,
- Principal physical and postal addresses and any registered office address, and
- Full names, proofs of identity, dates of birth and acceptable proofs of address for all controllers of the organisation (less than 6 months old) and their relationship to the organisation (president, secretary, treasurer, committee members, management team and other members with effective control of the organisation).
- For the certification of copies of documents which I do not sight, the copy must be certified as a true copy by a trusted referee, that is, anyone over the age of 20 and who is a Member of the Police, Justice of the Peace, registered medical doctor, registered nurse, minister of religion, lawyer, notary public, chartered accountant, New Zealand Court official, or a person who has the legal authority to take statutory declarations in New Zealand AND the trusted referee must not be related to you; for example, a trusted referee cannot be your spouse, parent, child, brother, sister, aunt, uncle or cousin etc., nor a person who lives at the same address as you, nor a person involved in the transaction or business requiring the certification.
- Certification when overseas
When certification occurs overseas, copies of international identification provided by a person resident overseas must be certified by a person authorised by law in that country to take statutory declarations or equivalent in the person’s country.
- Method
- For identification verification, the trusted referee must sight the original documentary identification and make a statement to the effect that the documents provided are a true copy and represent the identity of the named individual:
The document provided is a true copy of the original I have sighted and represents the identity of the named individual
…………………………………………………………
Signature of Trusted Referee
[Print Name of Trusted Referee]
[Print Occupation/capacity]
[Print Date]
- For address verification only, the trusted referee must sight the original documents and make a statement to the effect that the documents provided are a true copy:
Certified to be a true copy of the original which I have sighted
…………………………………………………………
Signature of Trusted Referee
[Print Name of Trusted Referee]
[Print Occupation/capacity]
[Print Date]
- Certification must include the Trusted Referee’s name, occupation/capacity, signature, and the date of certification.
For specific advice the issues discussed in this article, please contact Mark at mark@nfplaw.co.nz.