CDD - FAQ Individuals AMLHub Frequently Asked Questions

You must identify and verify:

1. the client;
2. each beneficial owner of the client;
3. each person acting on behalf of the client, including the authority to act on behalf of the client e.g. a lawyer or representative of your clients who is giving you instructions on their behalf.

This question relates to the concept of ‘material change in the nature and purpose of the business relationship’.

As with many other technical areas of AML/CFT in the context of real estate, this is currently a ‘grey area’. The DIA has not yet drawn a line in the sand as to the requirements for when such a situation occurs.

Reflecting on our experience from other sectors such as finance: generally where there is a change to the terms of an agreement such as that of general listing converting to a sole listing, it is deemed to be a material change. Therefore, customer due diligence would need to be undertaken.

You would therefore from an AML/CFT perspective, treat the client as a ‘new client’ and onboard them accordingly.

Details of how to do this are included in your AML/CFT Compliance Programme and are discussed in our CDD webinars.

The following identity information must be obtained for each individual:

1. the person's full name;
2. the person's date of birth; and
3. the person's residential address.

This information would need to be verified against supporting documents. There are many different document combinations you may use to verify this information, the most common are:

1. Passport + utility bill/bank statement.
2. NZ Driver’s Licence + the front and back of a credit card + utility bill/bank statement.

A beneficial owner is any individual (natural person) who satisfies one or more of the elements below:

1. the individual has effective control of the client;
2. the individual is a person on whose behalf a transaction is conducted;
3. the individual owns more than 25% of the client or person on whose behalf a transaction is conducted (e.g. direct/indirect shareholders).

What is effective control/an effective controller? Effective control is the ability to exercise control or influence over a company or entity. Typically, an effective controller will be the directors of a company or entity or those who hold senior positions. It could also be those who are funding the company, so this is something else that you will need to consider, and where relevant, inquire about.

Politically exposed persons (PEPs) are individuals who, through their position in public life, may be vulnerable to corruption. The definition of a PEP can be found in Section 5 of the Act and in your Compliance Programme glossary. Specifically, a Politically Exposed Person (PEP) is an individual who holds, or has held at any time in the preceding 12 months in any overseas country, certain prominent public functions. This includes heads of state or of government, government ministers, senior judicial or military officials, senior foreign representatives, ambassadors or high commissioners, senior executives of state/government owned enterprises and the Reserve Bank Governor (or equivalent position).

The definition of PEP also includes any immediate family member of the individual (spouse, partner, child, parent, etc.) and certain known associates (having regard to publicly available information) of an individual who is a PEP.

The New Zealand legislation currently limits this concept to foreign PEPs, and does not include domestic PEPs i.e. those who hold or have held public offices in New Zealand. While you should confirm with all clients whether they are a PEP or not, you will need to pay particular attention to those who have an obvious foreign connection.

There will always be some people that don’t have the required identification documents.

Your company will have exception handling procedures in place for these clients. Your exception handling procedures may only be used where the person demonstrates that they are unable to comply with normal requirements. You will need to ensure you follow the exception handling process documented in your AML/CFT Compliance Programme.

Please note that it is a business decision as to how you carry out the exception handling procedure.

No exceptions can be made in regard to requirements relating to Enhanced CDD (source of funds/wealth verification).

The Amended Identity Verification Code of Practice 2013 (IVCOP) sets out the combination of documents you can use to verify an individual clients or natural persons (for example a beneficial owner’s) name and date of birth. This is also included in Appendix 1 of your AML/CFT Compliance Programme. There are many possible documents you can use but the most common for verifying name and date of birth:

1. A New Zealand or overseas passport; or
2. A New Zealand Driver’s Licence in combination with a copy of the front and back of a credit card with the individuals name embossed on the credit card. You will need to ensure that the credit details are appropriately obscured to reduce any fraud risk.

Our CDD webinars include further detail regarding what documents can be utilised to verify an individual client’s name and date of birth. Please refer to the following links:

1. CDD for Compliance officers Link
2. AMLHub and CDD for sales (Part One)Link
3. AMLHub and CDD for sales (Part One) Link

A scan of a certified copy of an identity document that is emailed to you is not acceptable for CDD purposes. This is because it could easily have been falsified or tampered with prior to being emailed to you. You will instead need to collect the original certified copy (the wet ink copy)

Where a natural person (an individual) has changed their name - be it through marriage, legal name change etc. you will need to ensure you are verifying their current legal name. If married, you should obtain a marriage certificate to link their maiden name and their married name.

Unlike for the name and date of birth of a customer, there is no code of practice for verifying the address of a customer.

This gives you some flexibility in the approach you take. However, be sure to take reasonable steps to ensure the address information obtained is correct. When doing this, you must use documents, data or information from a reliable and independent source. Examples of how you may verify residential address:

1. New Zealand driver’s licence (if address is included);
2. recent (less than 12 months old) bank statement including client’s residential address;
3. recent (less than 12 months old) utility or rates bill including client’s residential address;
4. statement issued by a government agency to the person in the 12 months immediately preceding the date of application (e.g. a statement from the Inland Revenue Department);
5. a copy of a report from a credit reporting agency.

You have some flexibility when it comes to address verification. A rates bill to a P O Box with the residential address stated in location will suffice.

When you are verifying an individual you should obtain and verify their residential proof of address. There is no requirement to obtain and verify the address of the property they are selling.

In accordance to section 3.2 of your AML/CFT Compliance Programme, you must identify and verify:

1. the client;
2. each beneficial owner of the client; and
3. each person acting on behalf of the client, including the authority to act on behalf of the client.
Power of attorney satisfies the last requirement and therefore, must be identified. As the client satisfies the first requirement, they must be identified in addition to the POA.

Politically exposed persons (PEPs) are individuals who, through their position in public life, may be vulnerable to corruption.

The definition of a PEP can be found in Section 5 of the Act and in your Compliance Programme glossary. Specifically, a Politically Exposed Person (PEP) is an individual who holds, or has held at any time in the preceding 12 months in any overseas country, certain prominent public functions. This includes heads of state or of government, government ministers, senior judicial or military officials, senior foreign representatives, ambassadors or high commissioners, senior executives of state/government owned enterprises and the Reserve Bank Governor (or equivalent position).

The definition of PEP also includes any immediate family member of the individual (spouse, partner, child, parent, etc.) and certain known associates (having regard to publicly available information) of an individual who is a PEP.

The New Zealand legislation currently limits this concept to foreign PEPs, and does not include domestic PEPs i.e. those who hold or have held public offices in New Zealand. While you should confirm with all clients whether they are a PEP or not, you will need to pay particular attention to those who have an obvious foreign connection.

The following indicators, amongst others, are signs of an obvious foreign connection:

1. the client provides foreign identity verification documents;
2. the client provides foreign contact information (e.g. mailing address, phone number or email suffix);
3. the client indicates that they have migrated to New Zealand within the last 12 months.

You will need to screen any clients who you suspect might be a PEP, and should screen any clients who have an obvious foreign connection. A PEP screen can be completed through the AMLHub website within the update individual page.

It is recommended that a PEP search is conducted on all clients. However, your Compliance Programme (section 3.5) details when you need to conduct a PEP search within your agency.

You must get approval from a senior manager before beginning a business relationship with a PEP. You will need to contact your AML/CFT Compliance Officer who will guide you through the steps you need to undertake - part of this will require you to conduct Enhanced CDD on the PEP.

For estates, the following guidelines apply:

1. complete CDD on the executor(s), beneficiaries receiving more than 25% of the estate assets and any individual(s) acting on behalf of the estate; and
2. obtain a copy of probate.