Anti-money laundering

Globally, anti-money laundering and countering the financing of terrorism is receiving much publicity and traction. This wider publicity and acceptance has been gaining awareness within New Zealand since the onset of the Anti-Money Laundering and the Countering of the Financing of Terrorism Act 2009 (AML/CFT) was enacted.

Lawyers are currently subject to the Financial Transaction Reporting Act 1996 (FTRA) and in time will be also subject to the AML/CFT. The general feedback received suggests that the number of suspicious transaction reports (STRs) filed with the Police by those professions not yet subject to the AML/CFT remains very low.

Lawyers are reminded of their obligations in this area. The link to the suspicious transaction reporting guidelines on the Police website is www.police.govt.nz/sites/default/files/publications/fiu-guidelines-reporting-suspicious-transactions.pdf.

Regardless of the FTRA, lawyers have obligations to uphold the rule of law and facilitate the administration of justice. Section 4 of the Lawyers and Conveyancers Act 2006 (LCA) and Rules 2 and 8 of and Lawyers and Conveyancers Act (Conduct and Client Care) Rules 2008 (RCCC) provide that lawyers:

• not assist any person in an activity the lawyer knows to be fraudulent or criminal (rule 2.4);
• not knowingly assist in the concealment of fraud or crime (rule 2.4);
• disclose information which relates to the anticipated or proposed commission of a crime punishable by imprisonment for three years or more (rule 8.2(a)); and
• disclose confidential information which relates to the anticipated commission of a crime or fraud (rule 8.4 (b)).

Further guidance will be provided to the legal profession once it is known when lawyers will become reporting entities under the AML/CFT regime and the requirements are clearer.

Estate administration

The administration of estates are often matters that are considered by inspectors on review. In addition the Lawyers Complaints Service receives a number of complaints relating to various matters of estate administration. It is timely to revisit some of the common pitfalls.

• Client care/engagement – the practitioner should provide letters of engagement before probate is applied for so that the necessary information is obtained before undertaking any significant work. Some sensitivity may be required.
• Transparent communication – this needs to be both timely and comprehensive, normally to the executors, but in appropriate circumstances such as when the lawyer is the sole executor also to the beneficiaries. Where there is no independent active client the practitioner should demonstrate transparency through reporting to an independent person such as a close family member or spouse upon receipt of the appropriate authority.
• Assets and liabilities listing – for all administrations, except very simple estates, a formal schedule of assets and liabilities should be prepared in line with the provisions of s 112 of the LCA.
• Reporting – rule 12(7) of the Lawyers and Conveyancers (Trust Account Regulations) 2008 requires practitioners to provide clear and understandable reporting to clients for whom trust money is held on at least an annual basis, or promptly after or prior to completion of a transaction.
• Billing – ensure that the executors’ approval of all fees to be taken by deduction are received in advance and prior to deduction taking place. This, together with a timely work in progress report, will ensure that clients remain appropriately informed. Invoices should be rendered to the executors or where appropriate the beneficiaries.
• File layout – from review experience by inspectors it would seem that estate administration files may benefit from separate categorisation, as opposed to being simply chronological. Some suggested divisions are trustee and beneficiary correspondence, will and probate, taxation, real estate, other property and estate creditors.

If anyone has further questions or requires any assistance please contact the Law Society’s Inspectorate through the Financial Assurance Manager Jeremy.kennerley@lawsociety.org.nz, phone (04) 463 2936.