A family trust instructs an agency to sell a rental it owns. Nothing else about the trust seems unusual. Under s 22 of the AML/CFT Act 2009, what level of customer due diligence does the Act direct?
Correct Answer
D) Enhanced due diligence, because the customer is a trust.
Section 22(1)(a)(i) of the AML/CFT Act requires enhanced customer due diligence when a reporting entity establishes a business relationship with a customer that is a trust or another vehicle for holding personal assets. Section 22(6) lets rules modify the timing for real estate agents, but the trust still triggers enhanced due diligence. Enhanced due diligence includes source of wealth or funds checks.
Why This Is the Correct Answer
A trust customer falls within s 22(1)(a)(i), which requires enhanced due diligence.
Why the Other Options Are Wrong
Option A: Simplified due diligence, because trusts are low-risk customers.
Trusts are not on the simplified list; s 22(1)(a)(i) requires enhanced due diligence for a trust or similar vehicle.
Option B: Standard due diligence, because the transaction shows no suspicious features.
Section 22 requires enhanced due diligence for trusts whether or not anything looks suspicious.
Option C: No due diligence until the trust signs the sale and purchase agreement.
Customer due diligence is required when the business relationship is established, well before any sale.
Background Knowledge for Compliance
Source: https://www.legislation.govt.nz/act/public/2009/0035/latest/whole.html
Exam Tip for Compliance
Trusts, nominee-shareholder companies and some non-residents mean enhanced due diligence.
Common Mistakes to Avoid on Compliance Questions
- •Choosing standard due diligence because there is nothing obviously suspicious.
More Compliance Questions
A real estate advertisement states 'Best value in the area' without any supporting evidence. Under the Fair Trading Act, this statement is:
Under the Fair Trading Act 1986, which statement about advertising a property for sale is correct?
A client provides a bank cheque for $30,000 as a deposit and mentions recently selling cryptocurrency to fund the purchase. Under AML/CFT requirements, what is the appropriate next step?
An agent holds $180,000 in trust across four transactions. One agreement is validly cancelled because the purchaser's finance condition was not met, and both parties' lawyers confirm the $60,000 deposit is to be refunded to the purchaser. What is the correct trust account procedure?
Under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009, what is the minimum threshold for conducting customer due diligence when establishing a business relationship in real estate transactions?
- → An international client buying a $2.8 million commercial property provides a copy of their overseas passport but refuses any further identity checks or information, claiming diplomatic immunity. How should the agent proceed under AML/CFT requirements?
- → Which statement best describes the trust account requirements under the Real Estate Agents Act 2008?
- → An agency's trust account reconciliation reveals that interest earned on client deposits has been retained by the agency rather than distributed to clients. This practice is:
- → According to trust account regulations, how long must real estate agencies retain records of trust account transactions?
- → What is the primary purpose of the Consumer Guarantees Act 1993 in relation to real estate services?
- → Under the Consumer Guarantees Act 1993, if a real estate agent fails to exercise reasonable care and skill when marketing a property, what remedy might be available to the client?
- → A real estate agency's trust account shows a shortage of $5,000 during a routine audit. What is the most serious disciplinary order available under the Real Estate Agents Act 2008?
- → A real estate agent advertises a property as having a 'new roof' when they know it was repaired but not replaced. A buyer purchases based on this information and later discovers the truth. Which Acts could potentially apply to this situation?
- → Which statement best describes the primary purpose of trust accounts in real estate transactions?
- → A property advertisement states 'Guaranteed rental return of 8% per annum', although no one has contracted to pay that return. Under the Fair Trading Act 1986, this statement is:
People Also Study
Property Law & Legislation
56 questions
Agency Practice
89 questions
Sale & Purchase Process
63 questions
Professional Conduct & Ethics
46 questions
Related Study Resources
Previous Question
A buyer pays a $2,000 holding deposit in cash at the agency's front desk. Under reg 7 of the Real Estate Agents (Audit) Regulations 2009, what must the agency do?
Next Question
A listing advertisement says a suburb's values "will rise 20% in the next two years". The salesperson had no data or research behind the claim, and values later did rise. Under s 12A of the Fair Trading Act 1986, is the advertisement lawful?