During onboarding, an agency learns that its new vendor client is a senior official of a foreign government. Under s 22(2) of the AML/CFT Act 2009, what must the agency do?
Correct Answer
C) Conduct enhanced due diligence because the client is a politically exposed person.
Section 22(2) of the AML/CFT Act requires enhanced customer due diligence under s 26 when a reporting entity establishes a business relationship with a customer it has determined is a politically exposed person. A senior foreign government official fits that description. The agency proceeds with enhanced measures, including checking source of wealth or funds, rather than refusing the client.
Why This Is the Correct Answer
A politically exposed person triggers enhanced due diligence under s 22(2).
Why the Other Options Are Wrong
Option A: Refuse the listing, because politically exposed persons cannot be clients.
The Act does not ban politically exposed persons; it requires enhanced due diligence under s 26.
Option B: Apply simplified due diligence, because government officials are low risk.
Simplified due diligence is for listed entities such as government departments, not individual foreign officials.
Option D: File a suspicious activity report straight away because of the client's status.
Being a politically exposed person is not itself grounds for suspicion; the Act requires enhanced due diligence.
Background Knowledge for Compliance
Source: https://www.legislation.govt.nz/act/public/2009/0035/latest/whole.html
Exam Tip for Compliance
Politically exposed person = enhanced due diligence, not automatic refusal or reporting.
Common Mistakes to Avoid on Compliance Questions
- •Treating a politically exposed person's status alone as a reason to report suspicious activity.
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:
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