Responsibilities Under Money Laundering Supervision

Q2 2024 - Your Role as a Reporting Entity Member

Lan’s Enterprise Limited Training Program

Training Objectives

What you’ll learn today:

Understand your responsibilities as a reporting entity member
Identify the four key areas of AML/CFT compliance
Apply customer due diligence requirements correctly
Recognize when enhanced due diligence is required
Implement effective internal controls and monitoring

Your AML Responsibilities

Every Team Member Matters

As a reporting entity under the AML Act, every member has responsibility under money laundering supervision.

Key Principle: We all play a crucial role in preventing money laundering and terrorist financing.

Day-to-Day Responsibilities

What This Means for You

Carry out customer due diligence (CDD) measures
Verify customers are who they say they are
Risk assess our business and our customers
Maintain internal controls and monitoring systems

The nature of controls depends on business size, complexity, customer numbers, and service types.

Top 4 Key Areas

Your Core Compliance Pillars

Customer Due Diligence - CDD, ECDD, OCDD
Record Keeping - KYC docs, notes, correspondence, transactions
Transaction Monitoring - System alerts, controls, timely handling
SAR Reporting - Discovery, filing, timeliness

Customer Due Diligence (CDD)

What is CDD?

Definition: Taking steps to identify your customers and checking they are who they say they are.

Purpose: Prevent criminals from using our services for money laundering or terrorist financing.

CDD Requirements

Essential Information to Collect

Name
Date of birth
Photograph on an official document confirming identity
Residential address

Best Practice: Government-issued documents (passport) plus utility bills, bank statements, or other official documents.

CDD Requirements (2)

Additional Verification Sources

Electoral register
Credit reference agencies (Credit Bureau, Equifax)
Bank statements
Utility bills
Other official government correspondence

Critical Rule: If you have doubts about identity, stop dealing until you’re sure.

Beneficial Ownership

Identifying the Real Owner

What is a Beneficial Owner?

The person behind the customer
Who owns or controls the customer
On whose behalf a transaction is carried out

When Required:

Someone acting on behalf of another person
Establishing ownership of company, partnership, or trust

When to Apply CDD

Triggering Events

You must apply CDD measures when:

Establishing a business relationship with a customer
You have doubts about previously obtained identification
Customer circumstances change
High volume/frequency trading (even if not high value)

Business Relationships

What Counts as a Business Relationship?

Definition: A relationship you expect to be ongoing.

Required Information:

Purpose of the relationship
Intended nature (fund sources, transaction purposes)
Customer’s business or employment details
Source and origin of funds
Expected activity level and type

Business Relationships (2)

Detailed Information Requirements

Recent and current financial statements
Relationships between signatories and beneficial owners
Expected level and type of activity
Customer’s business or employment nature
Source and origin of funds in the relationship

Ongoing CDD

Monitoring Changing Circumstances

Why Monitor?

Amend risk assessments when circumstances change
Carry out further due diligence if necessary

Changes to Watch For:

Big changes in business activity level or type
Changes in ownership structure
Unusual transaction patterns

Structured Transactions

Deliberate Avoidance Tactics

Definition: Transactions deliberately broken into smaller amounts to avoid CDD checks.

Our Thresholds:

Alert: NZ$150,000
Reporting threshold: NZ$1,000,000

Structured Transactions (2)

Red Flags to Consider

Indicators of Structuring:

Multiple payments by same customer in short period
Multiple customers transacting for same person
Multiple customers sending to same recipient

Action Required: Investigate if transactions deliberately split to avoid thresholds.

Enhanced Due Diligence (EDD)

When EDD is Required (Sections 22-26)

Mandatory for:

Trusts or personal asset holding vehicles
Non-residents from countries with insufficient AML/CFT systems
Companies with nominee shareholders or bearer shares
Companies with nominee directors
Limited partnerships with nominee general partners

Enhanced Due Diligence (2)

Additional EDD Triggers

Complex, unusually large, or unusual transaction patterns
No apparent economic or lawful purpose
High risk level requiring enhanced scrutiny
Politically Exposed Persons (PEPs)
New technologies or products favoring anonymity
Activities requiring Suspicious Activity Reports

Key Requirement: Obtain Source of Funds (SOF) and Source of Wealth (SOW).

Record Keeping

What to Document

Essential Records:

KYC documents (identification, verification)
File and system notes
Email correspondence and communications
Transaction records
Risk assessments
Due diligence documentation

Retention: Follow regulatory requirements for record retention periods.

Transaction Monitoring

System Controls and Alerts

Key Considerations:

Effectiveness: Are alerts identifying genuine risks?
Handling: How are alerts being managed?
Timeliness: Are they dealt with promptly?

Continuous Improvement: Regular review and adjustment of monitoring rules.

Reporting Suspicious Activity

SAR Filing Requirements

Critical Questions:

How is suspicious activity discovered?
How is a SAR being filed?
Is it filed in a timely manner?

Timeliness is Essential: Delays can compromise investigations and regulatory compliance.

Internal Controls and Monitoring

Building Strong Defenses

Requirements:

Adequate internal controls
Monitoring systems to alert relevant staff
Ability to detect criminal attempts
Clear escalation procedures

Purpose: Alert relevant people if criminals try to use our business for money laundering.

Key Takeaways

Remember These Points

Everyone is Responsible
- Every team member plays a role in AML compliance
- Your vigilance protects our business and customers
Four Core Areas
- CDD, Record Keeping, Transaction Monitoring, SAR Reporting
- All equally important for effective compliance

Key Takeaways (2)

Critical Actions

Verify Before Proceeding
- Never settle transactions without verified customer ID
- Stop dealing if you have doubts about identity
Enhanced Due Diligence Awareness
- Know the triggers (Sections 22-26)
- Obtain SOF/SOW when required
Stay Alert to Structuring
- Watch for deliberate transaction splitting
- Monitor patterns across customers