This guide is to be read in conjunction with your Risk Assessment and Compliance Programme.

Section 1: Customer Due Diligence under the AML/CFT Act

Section 2: Individuals

Section 3: Companies

Section 4: Trusts

Section 5: Partnerships

Section 6: Simplified Customer Due Diligence

Section 7: Enhanced Customer Due Diligence

Appendix 1: Acceptable identity verification documents

Appendix 2: Certification / verification requirements

Appendix 3: Source of funds / wealth verification documents

There are three types of CDD under the Act: Standard, Simplified and Enhanced.

Standard CDD is the default level of CDD that applies to all low-medium risk clients, unless the client qualifies for Simplified CDD. Enhanced CDD applies higher risk clients/transactions and for certain types of clients deemed to be higher risk from an ML/FT perspective.

You must conduct CDD in the following circumstances:

You must identify and verify:

A beneficial owner is any individual (natural person) who satisfies one or more of the below elements:

Effective control is the ability to exercise control or influence over a company or entity. Typically, this will be the directors of a company or entity or those who hold senior positions. It could also be those who are funding the company, so this is something else that you will need to consider, and where relevant, enquire about.

As a starting point, the following identity information must be obtained for each relevant person:

You will need to refer to the relevant section for each client type (individual, company, trust etc) in this guide for guidance on how to obtain and verify this information and what other information you will need.

In addition to the above, you must also obtain:

Reporting entities are required to get information on the nature and purpose of the proposed business relationship with their clients. It includes understanding what the client is trying to achieve, how much business (volume and value) is expected, and how regular their interactions will be.

‘Nature’ refers to the client, products or services, etc. (i.e. what the client is bringing to the business relationship including expected volumes of business and how regular interactions might be).

‘Purpose’ relatesto the uses that the client intends to put the products/services to (i.e. why the client wants the particular product or service and what they are using it for).

A Politically Exposed Person (PEP) is an individual who holds, or has held at any time in the preceding 12 months, in any overseas country, certain prominent public functions. This includes heads of state or of government, government ministers, senior judicial or military officials, senior foreign representatives, ambassadors or high commissioners, senior executives of state/government owned enterprises and the Reserve Bank Governor (or equivalent position). The definition of PEP also includes any immediate family member of the individual (i.e. spouse, partner, child, parent, etc.) and certain known associates (having regard to publicly available information) of an individual who is a PEP.

It's important to note that the Act only considers foreign PEPs. While you should confirm with all clients whether they are a PEP or not, you will need to pay particular attention to those who have an obvious foreign connection.

The following indicators, amongst others, to be signs of an obvious foreign connection:

You will need to screen any clients who you suspect might be a PEP. You should screen any clients who have an obvious foreign connection.

Your AML/CFT Compliance Officer will guide you through the screening process.

You MUST get approval from a senior manager before beginning a business relationship with a PEP. You will need to contact with your AML/CFT Compliance Officer who will guide you through the things you need to do, part of this will require you to conduct enhanced CDD as set out in s9 of this guide.

You need to complete CDD on the following people:

The following identity information must be obtained for each relevant natural person:

See Appendix 1 for the acceptable combination of identity documents that you need to obtain. Its important that you obtain documents in line with these options.

You have some flexibility when it comes to address verification. Ideally, you need something from an independent and reliable source. We have included some documents considered to be reliable and independent.

If you can’t get one of the above, but you have visited the client in their home, a statement to the following effect could be used:

“I visited [insert name of client] at the following address [insert address] on [insert date and time]. During my visit I have gained a reasonable level of assurance that this person resides here. [your name and your signature]”

You need to do CDD, in line with the requirements for individuals in s1, on people who:

If there are no shareholders over 25% then you will need to onboard the directors and those who exercise effective control over the company.

You will need to obtain copies of the following documents – remember, it is not enough just to sight them, you must obtain a copy.

You need to do CDD, in line with the requirements for individuals in s1, on the following:

When professional entities are appointed, for example as corporate trustee or agent, you need to identify the individual(s) representing the corporate trustee or agent.

The table below sets out what you need to obtain. It is important that you get a copy of the trust deed and any subsequent deeds of amendment. You then need to conduct enhanced CDD in line with s9.

Note: you must conduct additional steps around the collection and verification of a client's source of funds/wealth, per section 7 on enhanced CDD.

You need to do CDD, in line with the requirements for individuals in s1, on all partners including all partners or agents with the authority to operate the account.

You will need to obtain copies of the following documents. Remember - it is not enough to just sight them, you must obtain a copy.

The Act permits Simplified CDD to be conducted on certain categories of clients.

If a client qualifies for Simplified CDD, there is no requirement to identify or verify beneficial ownership of the client. The following information should be collected:

The client's full name, and the name and date of birth and authority of the person acting on behalf of the client must be verified in accordance with Standard CDD procedures (excluding the requirement to verify address). For the purposes of verifying authority to act, you may rely on an authority provided in an application form or other document that shows a person's authority to act or transact on an account.

If conducting Simplified CDD you should contact your AML/CFT Compliance Officer for guidance.

Enhanced CDD is an enhanced level of CDD that you need to conduct for certain clients. It involves, in addition to standard CDD, the collection of information relating to a client's source of funds and wealth.

Note: the supervisors' expectations are clear: if you can't complete Enhanced CDD to the required standard, you must terminate the business relationship. There are no exceptions permitted when it comes to enhanced CDD.

You must conduct Enhanced CDD where it considers that a client presents a higher level of risk of money laundering or terrorist financing activities.

The following client types are deemed to be higher risk:

You must also conduct Enhanced CDD:

For Enhanced CDD, you must, in addition to Standard CDD, obtain the following information:

It is important that you include a narration/story of the clients source of funds/wealth. You must also, according to the level of risk involved, take reasonable steps to verify this information.

The level of verification is based on the client’s risk. To help you verify information about the client’s source of wealth or funds, you may use publicly available information on the internet, other commercially available databases or documents issued by third parties that support their financial position. Example documents for verification of source of funds/wealth are set out in Appendix 3.

Source of funds relates to where the funds have actually come from e.g. a New Zealand bank account in the client’s name. Source wealth relates to how those funds got there in the first place e.g. how they got the money. You need to understand and include information on a client’s wider wealth, but you only need to verify this information as far as the transaction itself is concerned. It is important that you consider and ensure the information you gather aligns with the transaction.

Per the Code, you have the following three options to verify a client's name and date of birth:

One of the following:

Two forms of identification, being one of:

And one of:

And one of:

Note: a driver license by itself is not enough. If the expiry date is not on the front of the drivers license you need to get a copy of the back. If using an eftpos or credit card, you MUST get the front and back, and will need the signature. Don’t forget to obscure the big number on the front. You can’t use an eftpos card that doesn’t have the client's name on it.

For documentary verification of CDD, the following verification or certification requirements apply:

(a) an employee can sight the original document and retain a verified copy;

(b) a copy of the original document can be provided, certified by a trusted referee; or

(c) an agent can sight the original document and provide a verified copy.

If you take a copy for your organisation to use internally then you would verify a document.

Only trusted referees can certify documents. A trusted referee must be at least 16 years of age and one of the following:

The trusted referee must not be:

(a) related to the client (e.g. cannot be a parent, child, brother, sister, aunt, uncle or cousin);

(b) the spouse or partner of the client;

(c) a person who lives at the same address as the client; or

(d) a person involved in the transaction or business requiring the certification e.g. the lawyer who is doing the conveyancing.

When certification occurs overseas, copies of international identification provided by a client resident overseas must be certified by a person authorized by law in that country to take statutory declarations or equivalent in the client’s country. You will need to research the relevant country to determine this.

Certification (or verification in the case of an employee or an agent sighting documentation) must:

(a) include a statement to the effect that the documents provided are a true copy and represent the identity of the named individual;

(b) include the name, occupation and signature of the employee or trusted referee and the date of certification/verification (Note: If completed by a trusted referee, the trusted referee must specify their capacity to act as a trusted referee from the selection above); and

(c) have been carried out in the three months preceding the presentation of the copied documents in the case of a trusted referee.

Note: If you take a copy of a document for internal use within your organization you VERIFY documents.

The list of documents below is non-exhaustive. In all instances, Enhanced CDD verification must be reviewed to confirm that it validates or confirms the Enhanced CDD information supplied. More than one document may be required to verify Enhanced CDD information. According to the level of risk, verification documents may need to be certified.

The Supervisors have also indicated that a bank statement, of itself, is unlikely to be sufficient evidence of source of wealth, unless the bank statement adequately identifies where the funds originated from.

In some instances, a letter from a professional, such as an accountant or lawyer, which outlines a client’s source of funds/wealth may be sufficient. Where such a letter is accepted, it should be certified and an assurance should be sought that the professional has an understanding of the clients financial position as it is relevant to the transaction.

Such a letter should: