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As signatory to several international initiatives relating to finance and taxation, New Zealand has introduced a number of regulatory and compliance requirements which include measures relating to the supply of legal services. This guide is intended to provide “at a glance” information to lawyers in private practice on three of the most important.
AEOI is a global information collection and reporting regime which came in to force on 1 July 2017. Inland Revenue (IRD) oversees the regime to enable New Zealand to fulfil international obligations. The regime has implications for lawyers as ‘entities’, also in their advisory capacities and as trustees.
New Zealand lawyers need to collect information from clients prior to funds being placed on interest bearing deposits (IBD). This information is provided to the bank holding a law firm’s trust account to enable it to fulfil its due diligence and reporting requirements. The scope and format of the information to be collected and shared is known as the common reporting standard (CRS). This includes comprehensive due diligence requirements.
Lawyers acting in an advisory capacity or as trustees should be aware of AEOI’s implications for trusts. This includes specific obligations lawyers may have themselves as trustees.
Currently lawyers should:
Lawyers will be reporting entities under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 from 1 July 2018. AML is about more than just suspicious cash transactions.
Lawyers need to take the following steps before 1 July 2018:
After 1 July 2018 law firms will need to:
FATCA is also an information collection and reporting regime which preceded the implementation of AEOI/CRS. It is similar, but there are some differences. It requires New Zealand lawyers to collect information from clients to provide to their bank when funds are to be placed on interest bearing deposit (IBD). FATCA requires foreign financial institutions (the lawyer’s bank) which are not exempt to report on financial accounts held by United States taxpayers or certain foreign entities with controlling persons who are US taxpayers (US reportable accounts).
Law firms should have already:
Lawyers need to be familiar with the penalty and anti-avoidance provisions which apply to both the AEOI/CRS and FATCA regimes under Parts 9 and 11B of the Tax Administration Act 1994.
IRD’s website contains comprehensive general information, including a summary of CRS obligations and its practical application.
The New Zealand Law Society’s suggested FATCA/CRS self-certification form templates are available here.
The OECD’s AEOI portal provides general information and a useful FAQ guide on the practical application of CRS is available here.
The New Zealand Law Society also has other Practice Briefings which provide greater detail:
FATCA: FATCA and New Zealand Law Firms.
AEOI/CRS: Automatic Exchange of Information and Common Reporting Standard.
AML/CFT: Preparing for becoming a reporting entity under the AML/CFT Act.