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Terrorism Financing: Red Flags in the Legal Profession
In an effort to combat terrorism financing, New Zealand authorities have identified several activities within the legal profession that pose a high risk of being exploited by criminals. These activities include:
Acting as a Nominee Director or Shareholder
Lawyers and conveyancers who act as nominees for clients may be unwittingly involved in terrorism financing. Criminals can use this tactic to hide their true identities and launder money through shell companies.
- To combat this risk, legal professionals must ensure that they thoroughly vet their clients and verify the source of funds used to establish these companies.
Providing an Office Address
Lawyers and conveyancers who provide office addresses for companies may also be at risk of being exploited by criminals. Terrorist organizations can use shell companies to hide their activities and launder money through legitimate businesses.
- Legal professionals must ensure that they are aware of the true ownership and control of the company, and verify the identity of the beneficial owner.
Managing Client Funds and Assets
Lawyers and conveyancers who manage client funds and assets may also be at risk of being exploited by criminals. Terrorists can use this tactic to launder money through legitimate businesses, such as real estate transactions or the purchase of luxury goods.
- Legal professionals must ensure that they are aware of the source of their clients’ funds and verify the legitimacy of these transactions.
Providing Real Estate Agency Work
Lawyers and conveyancers who provide real estate agency work may also be at risk of being exploited by criminals. Terrorists can use this tactic to launder money through real estate transactions, such as the purchase or sale of property.
- Legal professionals must ensure that they are aware of the true ownership and control of the property, and verify the identity of the beneficial owner.
Specified Services
Lawyers and conveyancers who engage in certain specified services may also be at risk of being exploited by criminals. These services include activities such as:
- Buying, selling, or transferring businesses, legal persons, or real estate.
- Terrorists can use these tactics to launder money and hide their true identities.
Red Flags
To combat terrorism financing, legal professionals must be aware of the following red flags:
- Unusual payment patterns or large cash transactions
- Lack of transparency in company ownership and control
- Failure to provide identification or proof of identity
- Suspicious or unusual business activities
- Inability to verify the source of funds used for a transaction
Conclusion
The legal profession plays a critical role in combating terrorism financing. Legal professionals must be aware of the risks associated with certain activities, such as acting as a nominee director or shareholder, providing an office address, managing client funds and assets, providing real estate agency work, and engaging in specified services. By being vigilant and reporting suspicious activity, legal professionals can help prevent terrorism financing and protect their clients from exploitation.