Achieving AML/CTF compliance in the legal sector

OPINION: NEW ZEALAND DEPARTMENT OF INTERNAL AFFAIRS PUBLISH FINDINGS ON AML/CFT COMPLIANCE IN THE LEGAL SECTOR:

On 21 July 2020, the New Zealand Department of Internal Affairs (DIA) published the findings for the legal sector (law firms and sole practitioners) on the compliance assessments that it had carried out between January 2019 and January 2020.  

The DIA reported that overall the legal sector had made good progress in achieving AML/CTF compliance and in their review posted the top 5 compliant and non-compliant areas, which were as follows:

Top 5 “compliant” areas

1. Appointment of an AML/CFT compliance officer
2. Risk based customer due diligence – understanding the ML/TF risks that customers present, which is risk-based
3. Use of regulatory guidance materials, specifically the legal sector risk assessment and national risk assessment
4. Assessing channel risk in the enterprise ML/TF risk assessment
5. Assessing product and services risk in the enterprise ML/TF risk assessment

The findings also reported the most commonly identified areas of non-compliance.

Top 5 “non-compliant” areas

1. Country risk exposure in the enterprise ML/TF risk assessment, particularly how to determine which countries that have insufficient AML/CFT systems
2. Application of the Amended Identity Verification Code of Practice, which is being used in non-compliant ways, for example if customers forget their identity documents
3. Documented systems, procedures of controls to identify complex or unusual transactions and records related to alerts, case investigations or findings
4. Prescribed transaction reporting (PTR’s) and how the AML/CFT programme meets these requirements was often missed
5. Over-reliance on third parties conducting customer due diligence where limited oversight has been carried out on the outsourced third-parties controls.

Overall, there are thousands of lawyers in New Zealand that have been subject to AML/CFT requirements and it seems that whilst there are areas for improvement that the sector overall has embraced the required steps to meet their compliance obligations.

This should demonstrate to the Australian Government and AUSTRAC that applying AML/CTF laws to new industry sectors is not as difficult as they might think and whilst these laws remain out of scope for lawyers, accountants, real-estate agents, high-value dealers and other sectors, the Australian economy will remain vulnerable to financial crime.

For the report, go to the DIA’s website – https://www.dia.govt.nz/AML-CFT-Legal-Sector-Regulatory-Findings

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