New Zealand Authorities Crack Down on Politically Exposed Persons and Due Diligence Lapses
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Enhanced Risk-Based Regulatory Approach
The Department of Internal Affairs in New Zealand has launched a targeted compliance assessment program to review reporting entities’ policies, procedures, and controls for dealing with politically exposed persons (PEPs). This initiative aims to enhance the country’s risk-based regulatory approach and reduce money laundering and terrorist financing risks.
Definition of Politically Exposed Persons
A PEP is defined as an individual who holds or has held a prominent public function in an overseas country, including heads of state, senior politicians, or officials with a public profile. Given their high-profile status, PEPs are considered more vulnerable to money laundering and terrorist financing risks.
Key Findings
The assessment program focused on 50 reporting entities, including lawyers and real estate agents with international connections. The key findings were:
- Most lawyers were partially compliant in terms of policies and procedures for conducting PEP checks.
- A significant number of lawyers failed to keep records of each check conducted.
- Real estate agents showed better compliance rates overall.
- Entities using third-party electronic customer due diligence services had higher compliance rates for PEP checks.
Recommendations
In response to the findings, authorities are urging reporting entities to review and strengthen their policies, procedures, and controls for conducting PEP checks. This includes:
- Having a policy in place to conduct PEP checks on every customer and beneficial owner.
- Obtaining senior manager approval before engaging with a PEP.
- Keeping records of each check conducted.
Key Takeaways
Reporting entities must take reasonable steps to determine if a customer or beneficial owner is a PEP and apply additional measures to mitigate the risk. Authorities are encouraging reporting entities to review their policies and procedures to ensure they are meeting their AML/CFT obligations.
Resources
For more information on PEPs and due diligence requirements, please visit the Department of Internal Affairs’ website or contact amlcft@dia.govt.nz or 0800 257 887.