Anti-money laundering overview
The government has recently made changes
to the Anti-Money Laundering and Countering Financing of Terrorism Act 2009
(the "Act") to prevent money laundering and terrorism financing within various
businesses and professions (including lawyers, accountants and real estate
The Act aims to enhance the reputation of New Zealand businesses and maintain
the view that New Zealand is a safe place to run a business.
Money laundering is the process of disguising the origins of illegally
obtained money. Financing of terrorism is where financial support is provided
to individual terrorists or terrorist organisations.
The Department of Internal Affairs ("DIA") regulates and monitors compliance
with the Act and is responsible for reporting any breaches.
The Act imposes preventative measures to ensure services provided by
businesses are not used by criminals to hold and move funds anonymously.
Compliance with the Act for lawyers came into place on 1 July 2018. This
involves lawyers completing customer due diligence ("CDD") on clients before
acting for them even where they are long-standing clients or the lawyer knows
The level of information required to complete the CDD will vary depending on
the matter type, but as a minimum, lawyers are required to obtain and hold for
each client involved evidence of full legal name, date of birth; and address.
Examples of evidence for the above information can be Driver's Licence or
Passport, and a utility bill, other government issued letter or bank statement
recording the client's address.
Depending on why you have instructed a lawyer to act for you, further
information may be required. For example, if a lawyer is paying funds to you
from their trust account, the lawyer must also confirm with you the bank
account number that the funds are being paid to. This usually involves
obtaining a bank deposit slip, bank statement or online screenshot showing the
account number and your name.
Inside this edition
Anti-money laundering overview
What to know when building a house with a
the new gun law changes
Trader and Limited Liability Company liability compared
How many directors need to sign?
Importance of insurance in buying a home
Alternatively, where lawyers receive funds into their trust account,
particularly from overseas accounts, they may require verification of the
funds. This is particularly important in property transactions as the DIA have identified overseas money being laundered in this
This information is not only required for individuals, but also for trusts,
companies and partnerships. So, if you have a lawyer acting for your family
trust for example, they will require proof of address and ID for each trustee.
In the case of a company, your lawyer will require the same information for
all directors and shareholders.
You will find that if you require a real estate agent, lawyer, and your bank
for a single transaction, all three entities will ask for the same information
(where they do not have the information already). Accordingly, it is best
practice if you can provide the required information to the parties that
require it from the outset of your matter. This will ensure your matter
progresses smoothly and may result in reduced CDD compliance fees.
While the Act has imposed further compliance requirements and administrative
work on lawyers and other professionals, its aim is to reduce money laundering
and prompt people to question 'red flags' to ensure that New Zealand is a
desirable and safe place for business.
Building a house
can be a stressful, expensive and intimidating prospect for both new and
experienced customers. As such, ensuring you are aware of not only your rights
and obligations, but also those of the builder, is crucial.
Prior to even hiring a builder, you should complete your own due diligence on:
* the builder,
* your financial position,
* the requirements of your lender during the build (if any),
* what consents are required and when they should be applied for,
* whether the building quote encompasses all aspects of the build (consents,
labour, materials, mark-up, subcontractors, architects input and final designs
* the time intended to complete the build.
If you can be thorough with your due diligence before entering into a building
contract and starting the build, it can help to reduce costs, aide the
builders and ensure that no unnecessary delays/costs are incurred.
If you are using a builder, and the cost of the build is expected to be over
$30,000 then the builder is required to provide you with a building contract.
There are four groups of documents your builder needs to provide you with:
1. a written building contract to be signed and dated before the work is
2. a Ministry of Business Innovation and Enterprise ("MBIE") consumer
3. an MBIE disclosure document; and
4. copies of the various documents to be given to you at the end of the job
(insurance policies, guarantees, warranties, maintenance requirements).
Your builder should be advising you to review the documents before signing and
also that you should be taking the documents to a legal professional to
review. Given the size of the documents and language that can be used, some of
the terms and conditions can be hard to grasp if it is your first time. As
such, the documents should be reviewed by an expert who can explain the
contract to you and advise whether the contract terms are
beneficial/detrimental to your intentions.
A building contract can vary depending on the builder, hence why it is
important for it to be reviewed on a case by case basis, as rules and
regulations are ever changing for builders. The
www.building.govt.nz website has a
standard checklist for you to review, which lists all the clauses you should
expect to see in your own contract, this is subject to the type of role played
by the builder.
Issues that arise in a build dispute are commonly to do with the cost,
miscommunication and cost of variations, quality of the finish and what
responsibilities each party had during the build. These issues are often a
result of poorly drafted contracts that lack key details and the necessary
clauses. Taking your time to understand and amend (if needed) any documents
required for the build will go a long way to avoid such issues.
Contracts by their nature are always more difficult to change after they have
been signed, hence I suggest you are at peace with the agreement prior to
signing if at all possible.
In conclusion, given the investment made in a build, it is highly recommended
that you review this with your lawyer, so they can raise any 'red flags' in
the contract before it is signed. "Plan for the worst, hope for the best".
Following the Christchurch Terror Attack
of March 15th 2019 changes to the gun laws in New Zealand have been made. The
Arms (Prohibited Firearms, Magazines, and Parts) Amendment Bill came into
force on 12th April 2019; which was rather swiftly by legislative standards.
The aim of the Bill is to tighten gun control in New Zealand by amending the
Arms Act 1983.
The most significant change the Bill makes is prohibiting semi-automatic
firearms, magazines, and parts that can be used to assemble prohibited
firearms. Semi-automatic firearms, other than those that are capable of only
firing up to 0.22 calibre cartridges and hold no more than 10 cartridges and
semi-automatic shotguns that are capable of holding no more than 5 cartridges,
are now prohibited. The bill also classes pump-action shotguns that can hold
more than 5 cartridges and those that can be used with detachable magazines as
The new penalties that come from the changes include a maximum of 10 years
imprisonment for the use of a prohibited item to resist arrest. Also, a
maximum of 7 years imprisonment for carrying a prohibited firearm in a public
place, carrying a prohibited firearm with criminal intent, presenting a
prohibited firearm at another person, and possessing a prohibited firearm
while committing an offence, which itself has a maximum penalty of 3 years or
more. A maximum imprisonment of 2 to 5 years is now the penalty for the
unlawful possession of prohibited parts, magazines, or firearms.
Until December 20th 2019, an amnesty from prosecution is in place for the
possession of prohibited parts, magazines, and firearms. This allows any
persons who are in possession of these now prohibited items to hand them in to
police. This can be done anonymously, although anonymous handovers will not be
eligible for the buy-back offer in place throughout the amnesty period. The
amnesty also allows for handover of these prohibited firearms, and
non-prohibited firearms if desired, even if a valid firearms licence is not
Applications can be made to the Police for permits to possess prohibited
items. The limited exemption categories include employees of the Department of
Conservation involved in operations for the control of wild animals or wild
pests, and persons that hold concession granted by the Minister of
Conservation to undertake wild animal recovery operations. You may also apply
for a permit to possess a prohibited firearm if the item has special
significance as an heirloom or memento.
With the Bill being introduced to Government on April 1st 2019, just over 2
weeks on from the terror attacks, and Royal Assent being granted on April 11th
2019, concerns were raised at the speed at which the Bill was progressed. In
fact, the reason behind the sole opposing vote to the changes was because of
the speed at which the law was being rushed through. Politicians in reply to
this concern have promised that there will be further laws and changes to
A sole trader is a common ownership
structure that can be used to operate a small business. The main operator of
the business may be one person, supported by a family member such as a spouse.
Operating a business may be risky if the right asset protection and insurance
is not in place to support the sole operator. The extent of their liability is
that they are personally liable for any business debt or loss, including
For debt owing to a creditor, a claim can be made against the personal assets
of the sole trader, including funds in bank accounts, and the personal family
home. Liability on behalf of the sole trader, will end when the sole trader
has passed away unless a Will provides for the business to carry on.
Should the sole trader cease to operate their business, then there is a
statute of limitation of between 6 to 15 years for creditors to make a
personal claim, and therefore liability after this time may not apply.
When borrowing funds there may be a linked personal guarantee from the sole
trader. When the debt is repaid to the bank, it will remain in place unless
the lending organisation agrees in writing for its release. Liability can
continue onto the sole trader's executors and assignors under their Will.
The difference between a sole trader and the structure of a limited liability
company, is the latter is seen to be a separate legal entity from the
shareholders of the company, who are its owners.
Liability on behalf of the shareholders of the company is limited to the
amount of the debt belonging to it in ratio to the shares held. If the shares
haven't yet been paid for in full there is an element of exposure of liability
on the unpaid amount. If the company goes into liquidation, assets sold,
creditors paid back first, then shareholders have a right to a share in the
As liability can be dependent
upon many things, directors can still be held personally liable for the
company debt if trading while it is insolvent and if they have given personal
It is important for directors and shareholders to remember to have personal
guarantees released in writing when changing lending institutions or retiring
from the company.
Personal liability on behalf of directors may also apply where the director(s)
have not acted in the best interest of the company, and may have failed to act
in accordance with the Companies Act.
If the company is acting in the capacity as an independent trustee of a family
trust, liability can be disclosed not to be personal and unlimited. It can be
limited to an amount equal to the value of the assets of the trust, that are
in the hands of that trustee company available to meet the trustee company's
liability from time to time. The relevant time for the purposes of assessing
the value of the assets of the trust will be the time of enforcement of any
judgment or order against the trust.
It is important when entering into business to receive proper advice regarding
the ownership structure, and consider how much risk and liability you are
willing to accept when deciding to become a sole trader, director and or
shareholder of a limited liability company.
The word caveat is Latin and translates
to "let him or her beware". A caveat can be lodged against someone's property
title to protect the lodging party's right or interest in the property and it
prevents the registered owner of the property from selling, mortgaging, and
dealing with the property until the caveat is removed from the title.
To lodge a caveat you must have a "caveatable interest". Under section 138(1)
of the Land Transfer Act 2017, to meet the threshold of a caveatable interest,
(a) claims an estate or interest in the land, whether capable of registration
or not; or
(b) has a beneficial estate or interest in the land under an express, implied,
resulting, or constructive trust; or
(c) is transferring the estate or interest in the land to another person to be
held on trust; or
(d) is the registered owner of the estate or interest in the land and -
(i) has an interest that is distinct from that of a registered owner; or
(ii) establishes to the satisfaction of the Registrar that at the time the
caveat is lodged there is a risk that the estate or interest may be lost
Common examples of when a caveat could be registered are:
* A party has purchased a property and there is a substantial amount of time
between signing the contract and the settlement date.
* A purchaser of a property registering a caveat when the vendor is seeking to
cancel the contract.
* A party is a beneficiary who has an interest in land under a trust or
* A party has a lease over the land.
Please note that if a caveat is registered without reasonable cause, you could
be liable to pay compensation to anyone who suffers a loss as a result of the
caveat being registered.
There are three ways to remove a caveat from a title which are:
1. The person who lodged it (also known as a caveator), withdraws it.
2. When the caveat lapses. The registered proprietor applies to the Land
Registrar for the caveat to lapse. The caveator will then receive a notice
that an application has been made for the caveat to lapse and will have 14
days to notify the Land Registrar that an application has been made to the
High Court to sustain the caveat.
3. Apply to the High Court to have it removed. The High Court is required to
be satisfied that there is not a valid reason for the caveat to be registered.
The onus is on the caveator to prove there is/are reasonable ground(s) for the
caveat to be sustained.
In conclusion, whether you would like to protect an interest you have in land,
or would like to apply for the removal of a caveat from your property, I
advise you seek legal assistance to explore the best way to move forward to
resolve your matter.
How many directors need to sign?
Signing documents that bind a company to
obligations and potential liability is a key aspect of being a director of a
company. It is part of the role when a director is guiding and running the
While shareholders are required to ratify major transactions and key
decisions, day to day, the directors are in control. They can delegate duties
to CEOs and managers but ultimately have responsibility for directing and
overseeing what the company employees do.
Directors sign key documents at the Board level, following the constitution of
the company, which spells out how many directors are required to sign to bind
the company. The mechanics are that if two sign there does not have to be a
witness to that signing. Where one signs only, there must be a witness.
Major document signing should be done following a written directors Board
resolution relating to that particular matter.
Usually two directors sign once the resolution is in place. This protects the
directors and the company. They have each other's
backs and a clear paper trail of the document signing process.
Authorised signatories may be able to sign some documents either alongside one
director or in their place. In these instances, delegation protocols need to
be in the relevant background paperwork.
Importance of insurance in buying a home
Insurance is absolutely crucial, and when borrowing from
lenders to complete a house purchase, it is compulsory. Lenders will not allow
a loan drawdown without written confirmation that appropriate and sufficient
insurance cover is in place.
Usually there is replacement insurance relating to fire, earthquake and other
damage. Cover for contents go hand in hand with the replacement cover, but is
not compulsory. Highly recommended though!
These days you really need a valuation of the home being purchased to set the
correct and allowable amount of cover to be sought. Banks and other lenders
insist on this and then check the numbers in respect of what they are lending
in dollar terms against the potential insurance pay-out in the event of damage
to your house.
Replacement cover gives all the answers. The lender wants to know its lending
is secure, and your house has the ability to be rebuilt at best while covering
the amount they have lent at worst.
While fire and wilful damage are the cornerstone of insurance cover and why it
is vitally important, these days earthquake risk is also on everyone's minds
and must be included when arranging such cover.
If you have any questions about the newsletter items,
please contact me, I am here to help.
Scannell & Co - 122
Queen Street East, Hastings
(06) 876 6699 or (021) 439 567 Fax: (06) 876 4114 Email:
information in this newsletter is to the best of the authors' knowledge true
and accurate. No
liability is assumed by the authors, or publishers, for any losses suffered
by any person relying directly or indirectly upon this newsletter. It
is recommended that clients should consult S J Scannell & Co before
acting upon this information.
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