Comments from Ivan Vodanovich, Director, Vodanovich Law.
Thank you for your enquiry and for highlighting to the public what I personally consider to be such draconian legislation which has placed significant obligations on lawyers (as well as many other businesses) and as you point out will result in increased costs to the public when using legal services.
In my view this legislation has come about as a result of pressure from the United States of America which is upsetting as it questions to a point our sovereignty.
I also question how effective it will be. I wonder how many arrests will result from it compared to the massive inconvenience it will cause the NZ Public. I suspect that there will be very few successful prosecutions as the high level criminals are generally a step ahead of the authorities.
From the point of view of a lawyer I am horrified that under this legislation Client legal privilege has been eroded as we are under an obligation to report anything we consider suspicious in respect of our clients to the DIA. We are not even entitled to question our client about what we find suspicious. We simply have an obligation to report it. This goes against what we have been taught as lawyers as a cornerstone of our profession-the confidential nature of the Lawyer client relationship.
You are correct in your article that clients/customers will need to be patient and be prepared for legal costs to increase.
We are having to sight original proof of address and ID information and have to undertake what is known as CDD (Client due diligence) whenever there is money involved. Lawyers are required to decide what level of CDD needs to be undertaken depending on the facts of each case. This is onerous for the lawyer and annoying and costly for the client the majority of which in my opinion are decent law abiding citizens.
(Coming into force 1/1/2019)
Under Phase 2 of The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 real estate agents are required to conduct due diligence on all sellers before the agent enters into a listing with the seller. For purchasers that process will be carried out by their lawyer.
In general terms there will be a number of steps that the agent and the seller will be required to go through.
Client due diligence (CDD) –
The agent must establish the full legal name(s) of the ‘beneficial owner(s)/real person(s)’ selling the property.
If the property is being sold by a Trust, then all of the Trustees are considered to be ‘beneficial owner(s)/real person(s)’ If the sale is by a Company the ‘beneficial owner(s)/real person(s)’, those who own a 25% or greater share, must be identified.
Sellers can expect to be asked by their agent to provide documentation (Trust Deeds/Company Registration Certificates) to assist in the identification process.
Proof of Identity - ‘Beneficial owner/real person’
Once the agent has established who the ‘beneficial owner(s)/real person(s)’ are, those persons will be required to provide documentation to prove their identity. There are 3 identifications options that can be used.
Option 1 is photographic identification – some examples are a passport, a travel document a firearms licence. The photographic identification must contain the name, date of birth, a photograph, and the signature of the named person.
Option 2 is non-photographic identification – some examples are a birth certificate or a citizenship certificate. For this option supporting identification that includes a photograph of the person named on the non-photographic documentation in the form of a drivers licence, an 18+ card, or an international driver’s license must also be provided.
Option 3 is a NZ drivers licence supported by a bank card, a gold card, or an IRD letter.
Verification of documentation - ‘Beneficial owner/real person’
When the proof of identity documentation has been obtained further steps to verify that the documentation belongs to that person are required. This can be through a face to face process; or for NZ based persons a certificate of verification from a Trusted Referee; or for overseas based persons a certificate of verification from a person authorised in that country to take a statutory declaration.
Nature & purpose
The final step in the process is for the seller to advise the agent why they are selling the property; if they have sold or purchased other properties in the last 5 years, and what they intend to do with the proceeds from this particular sale. The agent must also make a personal assessment of the vendor/seller and decide if further investigations for the reasons for the sale are necessary.
Document recording
The agent must then record all of that information in a database system that can be available for the ‘supervisor’ (The Ministry of Internal Affairs) to audit and review.
Clearly this is all going to impose additional responsibility of the agent, but equally clearly it will impose a far greater level of disclosure for sellers and there will need to be an understanding that whereas a lot of the information required could previously have been seen as personal and private to the seller, that will no longer be the situation.
Courtesy of Max House, Compliance Manager, Barfoot & Thompson Ltd
