Proof positive

New Zealand has had laws in place for a number of years to tackle money laundering and the financing of terrorism. Initially, these laws required banks and other financial institutions, among others, to verify the identity of customers and clients. The requirements were extended last year to include lawyers, conveyancers, trust and company service providers and accountants.

In a measure designed to prevent the use of property transactions as a means of laundering funds, the Government has now further broadened these requirements to include the real estate industry. Where the sale of your business via an agency includes the disposal of land or a lease these requirements will apply to you.

Customer due diligence

From January 2019, all New Zealand real estate agencies will have to carry out due diligence on their clients under the Act to ensure clients are who they say they are, as well as monitoring transactions for unusual behaviour and reporting suspicious activity to the police.

Agencies will report annually to the Department of Internal Affairs and their Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT) and procedures will be independently audited every two years.

What will the changes mean for sellers and buyers of businesses?

Bayleys Realty Group general manager, legal and compliance, Caroline Williams, says that, generally, clients of real estate agencies will simply need to be conscious that they will have to provide some extra information.

Under the AML/CFT Act, all real estate agencies must carry out due diligence on sellers and – if the agent is acting as a buyer’s agent – the buyer.

This involves collecting copies of identification such as a passport or driver license, proof of address and, in some cases, verifying the source of a client’s funds or wealth. Where the client is a company or trust, verification needs to be carried out on the individuals who own or control the client.

“Most clients will be familiar with similar checks already carried out by their banks or other professional service providers. As with those processes, the type and amount of information requested will vary according to the type of customer who is doing business,” says Williams.

The process can be relatively straightforward, but may take longer for those transacting through complex trust or company structures or where parties are based offshore.

The new rules dictate that even those who have used an agency’s services before may have to be asked to confirm their identity.

“While the process will be fairly simple for many, identity verification may take days, and even weeks if a trust or company is involved, so it will be essential to take this into account when planning your business sale or acquisition.

“With other professions, including lawyers and accountants, also having to carry out checks, many sellers and buyers will find they have to tackle verification procedures more than once for a single transaction.

“Talking to your agent as early as possible and getting started with the paperwork will help ensure the process goes as quickly and smoothly as possible – so you can focus your attention on achieving the best possible deal.”

Williams says agents have been specially trained so they can guide clients through all the necessary checks, helping to minimise unnecessary delays or complications.

Key documents

Below is an indication of some the documents your real estate agent, lawyer or accountant may ask you to present in person or as a certified document as part of this process:

• Individuals – passport, NZ firearms licence or NZ driver licence. You will also need to provide a document showing your residential address (for example, a utility bill).

• Trusts – the trust deed and, for all trustees and settlors, the information required for individuals as noted above, together with information regarding the trust’s source of funds or wealth. Additional information may also be required for beneficiaries.

• Companies – details of the company, together with the information for individuals noted above for every individual acting on behalf of a company, or who has more than a 25 percent shareholding or other individuals with effective control of the company. Information regarding source of funds or wealth may also be required.

This list is indicative only and is not exhaustive. Your real estate agent, accountant and lawyer will be able to help you with specific requirements in relation to your situation.

Contact one of our specialist business brokers for an informed and timely take on the market and how we can achieve a great result for you.

0800 BAYLEYS