In a recent statement by the Financial Markets Authority, the Department of Internal Affairs (DIA) and the Reserve Bank of New Zealand (together, the Supervisors), it was agreed that the submission date for reporting entities to submit their annual anti-money laundering and countering financing of terrorism (AML/CFT) reports by 31 August 2021 should be extended. The new deadline is 30 September 2021. In their statement, the Supervisors also provided a reminder that the “Guidance: Complying with AML/CFT verification requirements during COVID-19 Alert Levels” (COVID-19 Verification Guidance), issued in March 2020, remains applicable.
Annual AML/CFT Reporting
Each reporting entity under the AML/CFT Act 2009 (Act) is required to prepare an annual report on its risk assessment and AML/CFT programme, and provide that report to its respective Supervisor. As New Zealand is in COVID-19 Alert Level 4 again, the Supervisors have acknowledged that the Alert Level restrictions may result in some reporting entities being unable to access information required to complete their Annual AML/CFT Report. Therefore, they have agreed to extend the submission deadline, for this year, from 31 August 2021 to 30 September 2021.
As there are serious consequences for failing to comply with the Act, this will be of great relief for those reporting entities that have yet to submit their annual reports.
COVID-19 Verification Guidance
While subject to COVID-19 Alert Levels 3 and 4, reporting entities are required to change how they operate their businesses. For example, at Alert Level 4, only reporting entities that provide essential services can continue to operate at their premises and at Alert Level 3, reporting entities generally cannot allow customers or clients to enter the premises. Therefore, under these Alert Levels, verification policies that reporting entities may typically use, such as face-to-face verification, may be unavailable.
As a response to these challenges, the Supervisors have provided a reminder that their COVID-19 Verification Guidance, issued for the first COVID-19 lockdown, remains applicable for reporting entities in the current climate. The COVID-19 Verification Guidance does not introduce new verification exemptions or alternatives, but rather highlights existing methods that may assist reporting entities with AML/CFT compliance under COVID-19 Alert Level restrictions. These include:
Under the Act, reporting entities may delay identity verification for new business relationships but delay the verification component of customer due diligence (CDD) until later, subject to the following conditions:
- it is essential not to interrupt normal business practice;
- money laundering and financing of terrorism risks are effectively managed through specific procedures; and
- verification of identity is completed as soon as is practicable once the business relationship has been established.
Under the Amended Identity Verification Code of Practice 2013 (IVCOP), reporting entities may use electronic verification options with a linking mechanism or additional measures to ensure the person being dealt with online is the genuine holder of the identity they claim to be.
Exception Handling Provisions
Under IVCOP, reporting entities are required to have exception handling provisions for circumstances where a customer is unable to provide their original identity documents. The COVID-19 Verification Guidance provides that with COVID-19 Alert Levels in place, this is a time when exception handling measures would be suitable.
For Ongoing Due Diligence and Account Monitoring
Under the Act, for ongoing CDD and account monitoring requirements, reporting entities following the prescribed risk-based approach may elect to not sight certain documents in certain circumstances or may accept scanned copies of documents as an interim measure.
With the increased restrictions of the higher Alert Levels, reporting entities will again have to rely on other methods for identity verification. The consequences of non-compliance are severe, so reporting entities must proceed with further caution in these times. Even though we are in an unusual environment under COVID-19 Alert Levels, the Supervisors still expect the AML/CFT regime to be complied with as it would under any other circumstances.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.