Australia has been scrutinised for its slow reaction to strengthening anti-money laundering (AML) legislation, but new rules in New Zealand have cost agents millions.
Earlier this year, AML experts in Australia warned the country lagged behind the global standard when it came to combating the flow of illicit money entering the housing market.
New Zealand took the step to introduce legislation that came into effect at the start of this year to curb money laundering.
However, the cost of implementing the policy has cost the real estate profession more than $NZ20 million, according to the Real Estate Institute of New Zealand (REINZ).
As a result of the legislation, agencies became reporting entities and were required to do the following:
- Verify vendors’ identity by collecting identity documentation and, in some cases, financial information
- Report suspicious transactions to the Police Financial Intelligence Unit, e.g. if a purchaser wants to pay their deposit with large amounts of cash
- Have written compliance programs including an assessment of the particular agency’s risk of encountering money laundering
- Ensure that all their agents are trained in AML
- File annual reports to the Department of Internal Affairs (DIA), and
- Be independently audited every two years
It has required a significant level of upskilling, while new systems and processes have been implemented. In many cases, compliance officers have had to be hired, REINZ chief executive Bindi Norwell said.
“Conservative estimates are that it’s cost the profession in excess of $20 million to implement the system and processes to meet the AML legislation, most of which has been absorbed internally rather than being passed on,” she said.
“Additionally, it’s likely to cost the industry in excess of $25 million each year to manage compliance on an ongoing basis.”
Ms Norwell pointed out that although it has been a significant cost to the industry, it is estimated more than $1.35 billion of illicit funds are laundered in New Zealand every year.
“It’s essential that real estate agents play their part in protecting the country against money laundering,” she said.