8. Reporting requirements
Trust Account Guidelines contents
Reporting to clients
8.1 When trust money has been deposited in your trust bank account, you must provide to each client a complete and understandable account of all trust money handled:
- in respect of ongoing activity, at intervals of not more than 12 months
- in respect of transactions which are not completed within 12 months, at intervals of not more than 12 months
- in respect of all other transactions, promptly upon or prior to completion of the transaction.
8.2 Where a client’s understanding is limited, you should (where possible) account to a person who can represent the client’s interest and stand in the client’s shoes as an intelligent inquiring owner of the money.
8.3 You must take reasonable steps to avoid situations where the only recipient of a statement or invoice is yourself or an associated person.
Periodic certificates to NZLS
8.4 You are required to forward a monthly certificate to the NZLS when the trust account has been written up and balanced for the month. The form of certificate covers matters such as the correctness of the trust account records and compliance with the Regulations. The NZLS distributes the prescribed form to all practices in a format that includes an identifying number for each practice. Completed certificates are due at the NZLS by the 10th working day of every month except that in January, 15 working days are allowed for the certificate as at the end of December.
Where, in completing your certificate, you have a bank error that has since been rectified at the time of signing, you should regard your trust account as being in order and no exception should be reported. A list of matters to check before signing the monthly certificate is on the NZLS website.
8.5 A quarterly certificate is also required from each practice on the status of all loans administered by the practice. Nil certificates are required where there are no such loans.
Money laundering transactions – reporting to Police
8.6 The Financial Transactions Reporting Act 1996 (FTRA) imposes duties on financial institutions (which includes law practices) to:
- verify the identity of customers/clients:
- where there is a suspicious transaction
- automatically in certain specified circumstances including where the amount of cash exceeds $NZ10,000 or the foreign equivalent
- report suspicious transactions to the Police Financial Intelligence Unit, P O Box 3017, Wellington 6140
- retain transaction, verification and certain other prescribed records for specified periods.
8.7 Practices come within the definition of financial institution when they receive funds for the purposes of deposit, investment or settling real estate transactions. Particular points to note in the FTRA are:
- Section 19 of the FTRA (dealing with legal professional privilege) provides that a trust account does not constitute a privileged communication for the purposes of the FTRA.
- Financial institutions are prohibited from disclosing to any person (other than the Commissioner of Police) any report of a suspicious transaction.
- The identity of the persons reporting a suspicious transaction is protected by the FTRA.
- A safe deposit service where money is held is subject to the FTRA.
8.8 If you fail to comply with the FTRA, you may commit an offence under that act. In addition, under the Crimes Act, criminal offences may be committed if you or your employees suspect that a client is using the trust account to launder money and you allow the transaction to continue. However, it is a defence if you prove that you allowed it to continue with the intention of reporting it to the police.
8.9 You should ensure that you have copies of the Police guidelines issued pursuant to the FTRA, and that your office procedures are adequate to deal with any situations that may arise. Copies of the Police guidelines can be obtained from the Financial Intelligence Unit from the above address or fax (04) 498 7405.