Anti-money laundering and counter-terrorism financing exemption for NZ accountants

This article was current at the time of publication.

Accounting practices carrying out “relevant tax transfers” under the Tax Administration Act 1994 are now covered by a class exemption from most obligations under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (the Act).

The Department of Internal Affairs (DIA), which issued the exemption, says that for many accounting practices (defined as accountants, bookkeepers, tax agents, and insolvency practitioners) tax transfers may be the only activity they conduct captured by the Act.

In a guidance note, the DIA says some activities carried out by accounting practices – including the relevant transfers subject to the exemption – present a low money laundering or terrorism financing risk.

“Without an exemption, the compliance burden that accounting practices would face in relation to these tax transfers would be disproportionate to the risks involved,” the DIA states.

Triple checking needed

CPA Australia New Zealand President Angus Ogilvie FCPA says the exemption was granted after industry-wide lobbying and is a “great result” for small practices – provided tax transfers are the only activity they undertake caught by the Act.

However, Ogilvie acknowledges that it is “not uncommon” for practices to carry out other activities.

“So, if they’re thinking this is a great win, they need to double- and triple-check” [that those activities are Act-compliant],” he says.

Practices that conduct only relevant tax transfers will still be reporting entities, subject to a limited set of AML/CFT reporting and record keeping obligations.

Further, transfers that don’t meet the relevant definition are not covered by the exemption – for example, a transfer of tax from a company to a person with no connection to the company.

The more limited set of AML/CFT obligations stipulates accounting practices carrying out relevant tax transfers must still:

• Report a suspicious activity involving a relevant tax transfer
• Keep reports of suspicious activities
• Conduct enhanced customer due diligence after becoming aware that they need to report a suspicious activity
• Conduct enhanced customer due diligence if a customer seeks to conduct a complex, unusually large tax transfer or an unusual pattern of tax transfers that have no apparent economic or lawful purpose.

A practice must also conduct enhanced customer due diligence when it “considers that the level of risk involved is such that enhanced due diligence should apply to a particular situation”.

To report suspicious activity, accounting practices must be registered with goAML, the New Zealand Police Financial Intelligence SAR reporting platform.

An accounting practice may also be a reporting entity with full AML/CFT obligations if it carries out “captured activities” other than relevant tax transfers, including:

• Acting as a formation agent of legal persons or legal arrangements
• Acting as or arranging for a person to act as a nominee director or nominee shareholder or trustee concerning legal persons or legal arrangements
• Providing a registered office or a business address, a correspondence address, or an administrative address for a company, a partnership, or any other legal person or arrangement (unless solely as an ancillary service to an activity not subject to the Act)

Accounting practices must still file an annual AML/CFT report to the DIA for the 30 June 2022 year, although those captured by the Act only for relevant tax transfers don’t have to file reports for future years.

However, accounting practices that carry out other activities captured by the Act will still need to file reports.

The exemption lasts until 14 July 2027.

Ogilvie favours a review of the Act’s requirement around practices providing registered office addresses for clients.

“Lots of companies now don’t have a formal office or directors don’t want to give their residential address to the Companies Office, where it’s publicly available,” he says.

“They use their accountant’s address, and that means the accountant gets served documents such as statutory demands or liquidation proceedings. The fact that practitioners are then caught by the legislation adds significant cost.”

Detailed guidance for accountants on their obligations under the Act can also be obtained from the DIA’s Tax Transfers Class Exemption and AML/CFT Information for Accountants webpages.