Why do I have to keep proving who I am?

Wheelbarrow with money-574Increasingly, you are being asked to supply evidence of your identity, where you live and how you obtained your wealth when wanting to invest, open a bank account or even take out a loan. This will become more common this year as lawyers, accountants and real estate agents progressively come under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (the Act). This will require you to supply similar information when engaging a lawyer or accountant, or when making a property transaction.

The NZ Police Financial Intelligence Unit estimates that NZ$1.35 billion is generated annually from laundering, primarily from drug and fraud offending. However, this is likely to be only what is known – the actual amount of illegal funds is likely to be significantly greater. The International Monetary Fund (IMF) estimates that approximately 2-5% of global GDP (approximately US$2 trillion) is proceeds of crime.

The Act is starting to cover more sectors of the economy in an attempt to plug known areas where criminals may attempt to launder money. The legislation is designed to look through structures such as trusts, companies and partnerships to identify ‘real people’ who own or operate them – and from there, identify how they obtained their wealth. If clients’ activities (including financial transactions) start to appear unusual, and if people suddenly have money which does not carry a simple explanation of how it was obtained, then those people upon whom the Act applies (e.g. financial advisers, banks, lawyers, accountants, real estate agents and others) must report those activities. From there, the Police may decide to investigate.

Money laundering and financing of terrorism is unlikely to be totally stamped out. All we can hope for is that over time, it becomes harder and harder for criminals to launder funds to make them legitimate.

Fortunately, identity verification is becoming easier with a number of technology based systems being introduced whereby only a drivers licence or passport number needs to be supplied and the software undertakes all the other checks behind the scenes.