Calls to regulate lawyers under anti-money laundering and terrorism finance Act

by Sol Dolor26 Sep 2016
The New Zealand Law society has suggested that it can be the supervising body of the legal profession under the framework of the Anti-Money Laundering and Countering Financing of Terrorism Act.
The suggestion was made in a submission the Law Society prepared for the act which saw its first phase passed in 2009 and come into full effect in June 2013. It is estimated that $1.5 billion is laundered in New Zealand each year.
With the implementation second phase of the Act being fast-tracked by the New Zealand Government and taking into consideration concerns raised by the Mossack Fonseca Papers about foreign trusts registered in New Zealand being used to launder money, the Act being tweaked to extend to sectors at risk of being misused by criminals.
This includes lawyers, accountants, conveyancers, some additional gambling operators and other businesses that deal in high-value goods, such as auctioneers, bullion dealers, jeweller, motor vehicle and boat dealers, and antique and art dealers, the Law Society said.
The Law Society said that the transition and implementation period for phase two of the Act is likely to be relatively short.
“Given a short lead-in period, the Law Society as a supervisor with an established knowledge of the legal sector would be effective at an earlier date. In contrast, an alternative supervisor would face a significant challenge in quickly gaining this capability,” it wrote in its submission to the Ministry of Justice.
There are three supervisory bodies under the Act: The Financial Markets Authority supervises securities, trustee corporations, and entities involved in investment and financial advice; the Reserve Bank of New Zealand supervises banks, life insurers and non-bank deposit takers; and the Department of Internal Affairs covers casinos, non-deposit taking lenders, money changers and other reporting entities not covered by either the FMA or RBNZ.
The Law Society said that rather than fold legal professionals into these supervisors, the Law Society can act as the legal profession’s watchdog under the Act to save the other supervisors from investing time and money to get up to speed on the legal sector.
Meanwhile, the Law Society also voiced concerns about the lack of a definition of “legal profession” in the Act. It noted, however, that the Act is meant to be extended to those who have practicing licenses.
The organisation points out that this may be a flawed, as it said there is a wide range of legal services within the legal landscape that non-lawyers can provide.
The Law Society warned that if the Act is extended to only cover those who have practicing certificates, criminals may just transfer to using non-lawyers to help with transactions.
In addition to this concern, the Law Society cautioned about the tight timeframe that’s being pushed for implementation of the second phase of the act.
"It would likely take law firms two to three years to properly implement systems and processes to allow them to comply. Firms would need to develop procedures manuals, run internal training sessions, appoint Money Laundering Reporting Offices, and bed in the new information gathering and filing protocols," the Law Society said.