The Department of Internal Affairs (DIA) has issued a formal warning to a law firm under the Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT Act) for the first time.
Small Auckland firm Kidd Legal is the recipient of the warning. Law firms have had compliance obligations under the AML/CFT Act since July 2018.
The DIA says Kidd Legal has failed to meet several AML/CFT obligations relating to the establishment, implementation and maintenance of an AML/CFT programme, and was unable to demonstrate how it would ensure compliance from staff. The firm also failed to adequately understand or assess the risk of money laundering and terrorism financing within the business, the DIA says.
Despite the warning the DIA says Kidd Legal is not alleged to be involved in actual money laundering or the financing of terrorism.
“The legal sector should be aiming to set the standard for AML/CFT compliance. Our inspection of Kidd Legal highlighted a lack of understanding and apathy towards developing and maintaining policies and procedures. This warranted the issue of a formal warning.” says Mike Stone, Director of DIA’s AML Group.
“New Zealand has a strong reputation globally and there is confidence in our financial system. We have a responsibility to maintain this for Kiwis, and for those outside our borders who want to do business here.”
The DIA requires Kidd Legal to take immediate action to rectify all areas of non-compliance and says the firm will continue to be closely monitored by DIA officials. The warning will also be referred to the New Zealand Law Society.
Earlier this month the DIA issued the first formal warning to a real estate agent, Property Brokers Ltd, under the AML/CFT Act. The DIA is one of New Zealand's three AML/CFT Act supervisors alongside the Reserve Bank and Financial Markets Authority.
Penalties for non-compliance with the AML/CFT Act can result in civil penalties of up to $200,000 for individuals, and $2 million, in the case of a body corporate; and criminal penalties of imprisonment for up to two years or a fine of up to $300,000, for individuals, and $5 million for a body corporate.
The formal warning to Kidd Legal was issued on January 27. Interest.co.nz is seeking comment from Kidd Legal.