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AML/CFT Phase 2 implementation now complete, says DIA

18 February 2020

The implementation of Phase 2 of New Zealand's Anti-Money Laundering and Countering Financing of Terrorism regime is now complete, the Department of Internal Affairs says.

The department has published two Sector Risk Assessments: Sector Risk Assessment for Financial Institutions and Sector Risk Assessment for Designated Non-Financial Businesses or Professions and Casinos.

It says these Sector Risk Assessments replace the previous Phase 1 and Phase 2 assessments published in 2017 and 2018. "The name changes reflect that the implementation of Phase 2 of New Zealand's AML/CFT regime is now complete," it says.

The Sector Risk Assessment for Designated Non-Financial Businesses or Professions and Casinos includes lawyers.

The department says as well as the name changes, there have been some updates to the risk assessment content. It says reporting entities should consider whether they need to review and update their own risk assessments and AML/CFT programmes.

Sector risks for lawyers - "Medium-high"

In the section on sector risks for lawyers, the report says the overall inherent risk is "Medium-high".

"Both domestic and international evidence and guidance highlight the ML/TF risks presented by the legal sector. The easy access and wide geographic spread of legal services, coupled with lawyers’ gatekeeper role and use in every phase of ML/TF and in many different ML/TF typologies, means this sector presents a medium-high inherent risk of ML/ TF," it says.

The report says New Zealand lawyers offer a wide range of services, many of which are attractive to criminals to launder their proceeds of crime. It says lawyers may be complicity in the ML/TF activity, they may be wilfully blind or corrupt, they can be unwittingly involved, or they can be entirely innocent and unknowingly involved.

"Lawyers may be used at all stages of ML/TF. Because of its wide availability and the ease of accessing products and services, the legal professional sector is a well-recognised avenue for ML/TF, with demonstrated involvement evidenced by Financial Intelligence Unit data.

"The medium-high risk rating is consistent with international experience and expectations, given lawyers’ exposure to ML/ TF vulnerabilities. The consequences of such vulnerabilities can be wide ranging and result in significant financial, reputational and even political impact."

Last updated on the 18th February 2020