Lawyers are at risk of being exploited by criminals to launder money. They’re among several professions whose members may be affected by changes to the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act.
To help lawyers understand the risks they face and build their compliance programmes, helpful guidance is available on the Department of Internal Affairs website. See the Codes of practice and guidance(external link) and the sector risk assessment(external link).
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If you’re a lawyer, you may need to put AML/CFT measures in place.
This will help prevent money laundering, make it easier for authorities to find out where ‘dirty’ money came from, prosecute criminals, seize illegally earned money and assets, and stop crime and terrorism.
Here’s a summary of the proposed changes.
From 1 July 2018, you’ll need to comply with the AML/CFT Act if you are carry out the following activities in the ordinary course of business.
Whether an activity is in your “ordinary course of business” will depend on your particular business. It’s ultimately a question of judgment, which takes into account certain factors.
For most businesses, it will be obvious if an activity is in your ordinary course of business.
If you’re unsure, consider things such as whether the activity is something you do frequently or regularly; involves significant allocation of resources; or is related to a service or product that’s offered to customers.
For more information see the In the ordinary course of business guidelines(external link).
If you provide any of the services outlined above, you’ll have to comply from 1 July 2018.
To get ready, you’ll need to take a number of steps beforehand. For more information, see “What do I have to do to comply with the AML/CFT Act?”
Services provided by lawyers are often used by criminals to hold and move assets and funds anonymously.
Introducing AML/CFT measures will deter criminals from using your services and help detect them if they do.
Importantly, it will also strengthen the overall AML/CFT system. For example, a lawyer may detect ‘red flags’ that might not be picked up by banks or other financial service providers who interact with the same customers. That’s because you may have more information about the people or funds involved in a particular transaction.
The greater the AML/CFT risks your business faces, the more you’ll have to do to manage these risks. A small firm with long-term local clients may have fewer risks than a large firm with clients around the world.
Initially, you’ll have to:
On an ongoing basis, you’ll have to:
Legal professional privilege will continue to apply, except when the lawyer reasonably believes the information is for a dishonest purpose or to aid or commit a crime. Information kept in relation to lawyers’ trust accounts will not be privileged.
For information about ways to reduce compliance costs, see: Working with others to reduce your AML/CFT compliance costs
The Department of Internal Affairs (DIA) will supervise lawyers, as well as other professions and businesses that Phase 2 of the Act applies to. DIA will help you comply with the law and enforce it when needed. Some of the things DIA will do include:
A range of existing guidance material is already available to help get you started. Now the Bill has been passed, we plan to engage with sectors to develop regulations, which will provide more clarity, and produce more guidance material. For more information, see: AML/CFT supervision and support for businesses