A new agency is setting up its AML/CFT compliance. Under s 58 of the AML/CFT Act 2009, what must it complete before it conducts customer due diligence or establishes its AML/CFT programme?
Correct Answer
A) A risk assessment of the money laundering risks it may face.
Section 58(1) of the AML/CFT Act requires a reporting entity, before conducting customer due diligence or establishing an AML/CFT programme, to assess the money laundering and terrorism financing risk it may reasonably expect to face. The written programme under s 57 must be based on that risk assessment.
Why This Is the Correct Answer
Section 58(1) makes the risk assessment the first step, before due diligence or the programme.
Why the Other Options Are Wrong
Option B: An independent audit of its customer due diligence procedures.
The audit reviews the risk assessment and programme after they exist; the risk assessment must come first.
Option C: An annual AML/CFT report filed with the Department of Internal Affairs.
The annual report is prepared on the existing risk assessment and programme, at a time the supervisor sets.
Option D: A trust account audit by a qualified auditor approved by the Authority.
Trust account audits are under the Real Estate Agents Act, not a precondition set by s 58.
Background Knowledge for Compliance
Source: https://www.legislation.govt.nz/act/public/2009/0035/latest/whole.html
Exam Tip for Compliance
Order of steps: risk assessment, then programme, then due diligence; audit and annual report follow.
Common Mistakes to Avoid on Compliance Questions
- •Writing the programme first and treating the risk assessment as an afterthought.
More Compliance Questions
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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:
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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?
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A purchaser pays the agency a $12,000 deposit in banknotes, which the agency banks into its trust account. Nothing about the payment seems suspicious. What reporting obligation arises under s 48A of the AML/CFT Act 2009?