Changes to the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act came into effect 1 January 2019 — you’re now required to verify the identity of your clients.
Note that this only applies to your client (generally the vendor or anyone else acting on their behalf). This includes landlords leasing commercial property.
You don’t need to verify the identity of purchasers (unless they’ve asked you to source them a property), or do any verification if you’re providing general advice, marketing or advertising.
In short, it’s easier than you’d imagine to launder money using property. From flipping properties to disguise a money trail, using a non-market price to shift profits, doing renovations to spend cash, to giving a physical space to commit crimes. It’s more prevalent than people imagine.
For vendors owning property in their personal names, only the identity and address of the individuals owning the property will need to be verified (in most cases). Verification can be as simple as grabbing a copy of their passport and bank statement — taking a photo of the originals on a phone should be fine.
Things get more difficult if the property’s vendor is a family trust. In these situations, you must verify the source of funds or source of wealth — as well as getting their identity and address details.
In practice, this means you’d have to a) verify how the trust originally got funds to purchase the property (this could be many decades ago!), and b) check through the trust deed and other trust documentation.
How we can help
Now, we know that vendors can sometimes be suspicious of agents — if you’re asking where they got their money from, then the conversation can get a little tricky (especially if you’re also asking them to sign a listing agreement!).
Vendors are (generally) happier to provide us, as their lawyers, the details on how they originally purchased the property.
This usually makes the verification process easier for us than it is for you.
If you refer new listings to us when signing them up, we can verify their identity and confirm with you they have passed our verification processes (with the vendor’s permission).
You’re then entitled to rely on our verification — this saves you from awkward conversations with your vendor.
Our approach: make it easy
We’ve found that making it easy for people to supply information speeds up the process, and removes the pain for customers. To check out how we get our customers to verify their identity, please click here.
Now the usual disclaimer applies to this — we’ve covered a complicated area in a very high level. This advice is general in nature and not intended to be specific legal advice. If you need more information then please get in touch. Alternatively, you can read more from the Department of Internal Affairs in their guide here.
Also, every Agency has slightly different policies and procedures. For example, for some agencies a photo you take of a licence on your phone isn’t accepted. It’s always important that you know the ins and outs of the rules for your agency.