Lawyers are dragging their heels on anti-money laundering (AML) compliance, risking penalties of up to $5 million, reputational damage and full-scale police investigations when the regulator begins its inspections towards the end of this year.

Also in the regulator’s sights are real estate agents, who have been required to be compliant since January and have six months’ grace before the regulator comes knocking. And, from August, dealers in high-value goods such as art, precious metals and gems, and top-end motor vehicles will be brought into the AML framework.

In the meantime, the regulator – the Department of Internal Affairs (DIA) – has trebled its staff numbers for monitoring AML compliance. Where it finds breaches, DIA is warning it will pass its findings onto the police and other law enforcers.

According to the NZ Financial Intelligence Unit, more than $1 billion – the proceeds from drug dealing and other crime – is laundered locally each year. Added to this is the dirty overseas money being laundered here, some of which is finding its way into property transactions, according to evidence from the DIA.
If you ask them, most law firms will say they have AML under control, says Jenine Colmore-Williams, executive director of Dimension GRC, an AML software and service provider. But the reality is quite different “To say that all lawyers are compliant would be a massive exaggeration,” says Colmore-Williams. While the big tier one firms know the risks and have largely put robust systems in place, tier two – the mid-sized firms is floundering. “We have significant intel from the market. [Tier two firms] are going at it with the best of intentions, albeit through the lens of frustration.”

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