Compliance not a “one size fits all” exercise for lawyers

The Anti-Money Laundering and Countering the Financing of Terrorism Act 2009 (AML/ CFT Act) is on the mind of many practitioners who have been approaching ADLS and asking for assistance on the topic.

ADLS established an AML/CFT Special Committee early this year to make Select Committee submissions on our members’ behalf, and to help practitioners come to terms with the incoming compliance regime. One way of providing assistance to the profession was to develop a series of seminars on the topic of AML.

The ADLS “AML/CFT Toolkit Series” is quite different to our normal CPD offerings, and will comprise four very practical sessions designed to provide practitioners with the tools to understand their AML/CFT obligations, and gain insights into how to approach and manage those obligations with confidence and in the most time-efficient manner. The four sessions each address the basic steps that practitioners need to work through in order to get started:

  • Role of the Compliance Officer (held earlier this month, now available On Demand);
  • Risk Assessments (coming up on 8 November 2017);
  • Customer Due Diligence (on 5 December 2017); and
  • Compliance Programmes (to be held in the new year, on 8 February 2018).

It is recommended that senior partners, practice managers and anyone else sharing in the responsibility for developing and maintaining their firm’s AML/CFT programme and compliance attend.

Each session will be led by lawyer Fiona Hall, a member of the ADLS AML/CFT Special Committee, who came to specialise in this area by “living, breathing and sleeping AML” from a number of different perspectives, including having been a AML Compliance Officer herself. As well as being a barrister and solicitor, Ms Hall has acted as head of compliance and privacy in conjunction with her legal roles, with primary responsibility for the development and implementation of AML programmes for entities within a substantial designated business group. We spoke to her about how she came to be doing AML/CFT work, what lawyers need to look out for, some common misunderstandings, and why people should come along to the Toolkit Series.

“AML work was something I fell into – as a friend told me, I do seem to have a knack of falling into a space where, legally, there’s a lot of movement,” muses Ms Hall. “I’d worked at big firms like Russell McVeagh, Linklaters and Bell Gully, but found that having children was not conducive to being a litigator. And then, one day, I was with the kids at the YMCA and got talking to a dad whose wife’s finance company was looking for a part-time lawyer.”

One thing led to another and she ended up taking the job, which quickly evolved into not only general counsel work, but also handling compliance under the Credit Contracts and Consumer Finance Act 2003 (CCCFA Act) when it was passed shortly afterwards. She was then shoulder-tapped to work at the Commerce Commission, due to her CCCFA experience. “I found it an extraordinarily good experience to work for a regulator,” she notes. “When you get to walk in the shoes of the regulator, your perspective does shift and you grow to better understand how they work.”

And then, some months before the AML/CFT Act took effect in 2013, Ms Hall took a new position as General Counsel and Head of Compliance for a business that was captured as a tranche 1 reporting entity. “Pretty quickly, it became apparent that, by default, I was also to hold the position of AML Compliance Officer”. With approximately five months to ensure the company was compliant, so began her complete immersion into New Zealand’s AML/CFT regime.

“Because I have been there, I understand things from the perspective of an AML compliance officer – I’ve been the reporting entity, done the required risk assessments, and filed my own STRs [suspicious transaction reports],” she says of her time in that job.

The role also involved a significant amount of engagement with the Department of Internal Affairs (DIA) as the regulator for the sector, which she says was always “very positive”. “People need to understand the pressure that will come on the DIA with the huge numbers of new reporting entities but, as I always say to my own clients, they shouldn’t be scared to engage and work with the regulator.”

So how do lawyers get started? As the Toolkit Series outlines, lawyers need to appoint a compliance officer, prepare a risk assessment, decide how they will go about doing customer due diligence, and map out their compliance programme. But despite this being heralded for some time, many lawyers have been putting off embarking on what feels like a monumental task – and that is where the ADLS Toolkit Series hopes to assist.

More obvious practice areas that will likely fall within the definition of reporting entity include conveyancing, business formation and fund/asset management (or similar), but Ms Hall notes that other practice areas, such as litigation, may also be captured.

“For example, if litigation firms have a big settlement in hand, they may find themselves in the position of ‘managing client funds’. That term is not defined in the Act, so you have to go back and look at the driving force behind the legislation, i.e. to pick up on money laundering. Internationally, there have been instances where parties ‘fake’ litigation and then settle, so firms do need to look at this. They may decide that there is no issue, but the important thing is that firms need to actively make that decision.”

“My concern is for lawyers to avoid inadvertent breaches of their obligations and possibly being subject to disciplinary action under the Lawyers and Conveyancers Act. I want to arm them to make actual, considered decisions about whether or not they have to comply and how to do so, rather than just getting into trouble because they didn’t know they needed to do something.”

The variety of ways in which law firms and lawyers set themselves up and practise mean that there is no “one size fits all” solution so, while there may be some purported standard form offerings in the market, Ms Hall has some words of caution about these.

“A risk assessment is not an out-of-the-box assessment that will be the same as for another firm down the road. You need to have an assessment that analyses the nature, size and complexity of your practice, your client demographic, your services, the countries with which you do business, the payment channels you use and the institutions with which you deal.

“So we won’t be handing out a risk assessment template as part of the Toolkit Series. Rather, we have designed the Toolkit to give lawyers and law firms enough knowledge to understand what will work best for them practically. It will hopefully get them asking the right questions and arm them with information to make good choices.”

“There are common, identifiable risk characteristics for legal practices, but it is up to each reporting entity to assess those in light of their own practice and to ensure that they put in place effective procedures to minimise that risk.”

“Any lawyer who is going to be involved in their firm’s compliance needs to know about this. I’ve been a compliance officer, so I’m able to offer pointers from the perspective of someone who knows what to look for – what will and won’t meet the brief, what you have to think about legally and practically, what I had to learn, and what I would do differently.”

To find out more about ADLS’ “AML/CFT Toolkit Series”, visit www.adls.org.nz/cpd. The next event in the Series, “Risk Assessments”, takes place on Wednesday 8 November 2017. Attendees will learn about what the purpose and minimum requirements of a risk assessment are and different approaches that may be taken, as well as gaining insights into how to evaluate and rate a practice’s risks, the advantages and disadvantages of outsourcing the risk assessment process, and practical ways to ensure assessments remain current as per legislative requirements.

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