The Auckland District Law Society (ADLS) wants the New Zealand Law Society to supervise lawyers for compliance with the Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT Act), but doesn't want lawyers to pay for this.
The ADLS makes this point in its submission on a Ministry of Justice consultation paper about the government's plans to implement phase two of the AML/CFT Act, which will see lawyers forced to comply with it.
The ADLS says it's concerned the existing three AML/CFT Act supervisors, the Reserve Bank, Financial Markets Authority and Department of Internal Affairs, don't understand how law firms operate. This, it argues, could result in inappropriate investigations and questions and insufficiently targeted form filling.
"We are also concerned, in this context, with a potential lack of understanding of legal professional privilege and the protection of legitimate client privacy," the ADLS says.
The submission notes an alternative put forward by the Ministry of Justice is an industry specific supervisor, but ignores the other alternative floated in the consultation paper being the creation of one single AML/CFT Act supervisor like Australia's Austrac.
"In this [industry specific supervisor] context we note that an appropriate supervisor could be the New Zealand Law Society," the ADLS says.
The New Zealand Law Society has also proposed itself as the supervisor of lawyers' compliance with the AML/CFT Act. The ADLS says benefits from this approach would include that the NZ Law Society understands how law firms operate and could therefore target investigations; it would enable enhanced protection of legitimate solicitor/client privilege; and provide the ability to combine the supervisory role with the NZ Law Society's existing supervisory role in relation to solicitors' and trust accounts.
"However, we see no reason why the additional costs (which would be incurred by the New Zealand Law Society) should (as they would) be borne by the lawyers themselves. We favour the New Zealand Law Society as the supervisor on the basis of recovery of agreed costs associated with that activity,' the ADLS says.
The group also suggests a list of "caught" activities it says need to be tailored to specifically relate to situations where money comes into lawyers' trust accounts, rather than the "too wide" and "not sufficiently precise" list of activities in the Ministry of Justice consultation paper.
The ADLS's suggested list includes; operating nominee companies, business sales and purchases, and trust structuring where trust funds are received.
Phase two, which the Government wants to pass into law by July next year, comes three years after the AML/CFT Act took effect in 2013. It proposes bringing lawyers, accountants, real estate agents, conveyancers, some high-value goods dealers, and the New Zealand Racing Board and the New Zealand Lotteries Commission into the AML/CFT Act regulatory net. Lawyers and accountants currently have obligations under the Financial Transactions Reporting Act 1996, including carrying out due diligence on customers’ identities and reporting suspicious transactions.
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