Parliament's Law and Order Committee has released a report on the Anti-Money Laundering and Countering Financing of Terrorism Amendment Bill, with a recommendation that it be passed with amendments.
The bill extends the AML/CFT obligations concerning risk assessment, monitoring, customer due diligence and reporting to lawyers, conveyancers, accountants, real estate agents, the New Zealand Racing Board, and some dealers in high-value goods - known as the phase two sectors.
At present the obligations apply to banks, casinos, and financial institutions. The amendment bill will also require the phase two sectors (except dealers in high value goods) to report large cash transactions and suspicious activity, and to develop and maintain a risk assessment and compliance programme.
Staged implementation
The committee has made amendments to clause 6 of the bill which provides for a staged implementation period. However, these relate to criticisms made of use of Orders in Council to bring legislation into force, and do not alter the timeframes.
Lawyers and conveyancers will continue to be bound by the provisions by 1 July 2018, or earlier if set by Order in Council. Accountants will be bound by 1 October 2018, real estate agents by 1 January 2019, and the New Zealand Racing Board and high-value dealers by 1 August 2019.
The committee says that some submitters expressed concern that the proposed timeframes were too short, and worried about being ready to meet their new obligations. The New Zealand Law Society's submission urged that the lead-in period for lawyers should be at least the same as for real estate agents
"We consider that, while the timeline may be challenging for some, overall the phased implementation would provide the various sectors with enough time to prepare for and make changes that are necessary to implement the reforms<" the committee says.
Definition of law firm
The committee has recommended a change to the definition of "law firm" to read "a barrister or barrister and solicitor, practising on the barrister's or barrister and solicitor's own account (whether in partnership or otherwise)", saying this would "cover both categories of practising solicitor: a barrister and a barrister and solicitor".
It also recommends deleting clause 5(b) of the definition of "law firm" which refers to partnerships, stating that a partnership is not a legal person and so cannot, itself, be a reporting entity.
Legal professional privilege
A recommended amendment is intended to make it clear that a lawyer may only withhold privileged information when they believe, on reasonable grounds, that the information is privileged in terms of section 42, which defines privileged communication.
However, the committee says it recognises the inherent difficulty where lawyers self-assess whether privilege applies in a given situation.
"We consider it appropriate to afford some protection from prosecution and disciplinary action that could arise from reporting or non-reporting by lawyers who have reasonable grounds to rely or not rely on privilege. Therefore, we recommend amending clause 27 to insert section 92(2): 'It is a defence to a prosecution under this section if a reporting entity believes on reasonable grounds that the documents or information relating to the activity were privileged communications'."
The report says this would provide that a lawyer who believes on reasonable grounds that information is privileged has a defence to the offence of failing to file a suspicious activity report in regard to such information.
"We also recommend amending clause 18 to replace section 44(4). New section 44(4) would make it clear that there would be no defence to civil, criminal, or disciplinary action against a lawyer for disclosing privileged information if the information was disclosed or supplied in bad faith. New section 44(4) also provides that there would be no defence if a lawyer disclosing or supplying information did so despite there being reasonable grounds to believe that the information was a privileged communication."
The committee says it considers these amendments emphasise the need to make reasonable case-bycase assessments. It says they are consistent with the more generic immunity from civil or criminal liability, available under section 77 of the Act, that applies to all reporting entities that act reasonably and in good faith.