Real Estate Sector Regulatory Findings

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This article is a summary of the Department’s findings for the real estate sector from its compliance assessments undertaken from 1 January 2019 to 31 July 2020.

Top 5 “compliant” areas 

  • Compliance Officers 

An area that real estate agents are getting right is the compliance officer role. Under the Anti-Money Laundering and Countering Financing of Terrorism Act (the Act), a reporting entity must appoint a compliance officer. This is an important role as the compliance officer is responsible for administering and maintaining the AML/CFT programme.

The DIA check that you have appointed someone to this role and look at whether they are an employee who reports to a senior manager. If you are self-employed, they expect you to be the compliance officer in most situations. 

  • Assessing the risks of your services

When undertaking your risk assessment, you must have regard to the products or services you offer.

The DIA have found real estate agents are sufficiently assessing the risk to their services. For example, they are considering whether the client can remain anonymous, or for an ultimate beneficial owner or the source of the client’s wealth or funds to be concealed.  

  • Annual report

You must submit an annual report to your AML/CFT supervisor. This report must be in the prescribed form and submitted at the time appointed by the supervisor. The annual report is usually due between 1 July and 31 August to cover the preceding twelve months until 30 June.

The DIA have found that real estate agents’ AML/CFT programmes document the annual report requirements.

  • Record Keeping

You must keep all records required by the AML/CFT Act. Record-keeping is an important part of your AML/CFT programme and must enable transactions to be readily reconstructed at any time. You must keep records for a minimum of five years after a transaction, activity, or wire transfer has been completed or your business relationship with a client has ended.

In addition to records of transactions and activities, you must keep:

  • customer due diligence (CDD) verification records

  • records relevant to the establishment of or obtained during the course of a business relationship with a client. You are required to keep all records relevant to the nature and purpose of the relationship and the activities undertaken for a client.  For example, this includes correspondence with a client and any notes or written findings you have made.

  • records relating to your risk assessments, AML/CFT programmes and independent audits.

Your AML/CFT programme should describe how you manage the retention of your records. For example, how and where you will store your records and ensure that all required records are kept.

It has been seen that real estate agents successfully adapt their existing business processes and IT systems to meet their AML/CFT record keeping requirements. The DIA have also seen some agents successfully implement controls to ensure all CDD requirements are met and records retained before they can list a property.

  • Regard to applicable guidance material 

It was found that most real estate agents have considered guidance material produced by the Department and the Financial Intelligence Unit (FIU). This includes the New Zealand National Risk Assessment and the DNFBP Sector Risk Assessment. These documents assist you to understand the types of money laundering or terrorism financing risks your business may face.

When undertaking a compliance review, checks are conducted to see if you have considered these documents in your risk assessment and in developing the policies and procedures for your AML/CFT programme.

Top 5 “non-compliant” areas 

  • Examining and keeping written findings

Your AML/CFT programme must set out how you will examine and keep written findings relating to complex or unusually large transactions and unusual patterns of transactions that have no apparent or visible lawful purpose. This requirement also applies to any other activity that by its nature, may be related to money laundering or terrorism financing. What these areas of heightened risk look like for you, including what is “complex”, “unusually large” or an “unusual pattern”, will depend on your business.

The real estate sector is assessed to have an overall inherent level of medium-high risk. Real estate is a high-value asset often used domestically and internationally to launder and invest criminal proceed