Keeping Your Money Clean

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Opening a bank account and buying and selling investments are not such simple processes as they were a few years ago. Now you must provide formal photo identification such as a passport or driver’s licence, proof of address, and, if you are transacting a large sum of money, evidence of how you came to have the money. For family trusts, each trustee, including independent or professional trustees, must provide this evidence as well as a copy of the trust deed. While this can seem like an invasive process, especially for elderly investors, it is all for a good cause. New Zealand’s financial system has such a good international reputation that it is a target for criminals wanting to ‘clean’ the proceeds of crime. In the interests of keeping our system clean, financial institutions and financial advisers are required to check identification and source of funds and report suspicious transactions to the Financial Intelligence Unit. Some would say this all seems a bit unnecessary, however each year around 10,000 suspicious transactions are reported. Criminals can go to extreme lengths to clean money, including a process called ‘layering’ where they spread their funds through many small transactions to avoid suspicion. It’s not just hardened criminals who are involved. Think of all those tradespeople who do ‘cashies’ and then spend or invest their money without declaring the income. Tax evasion is just as much a crime as theft or fraud.

Later this year, the range of entities required to comply with anti-money laundering legislation will be extended to include lawyers, accountants, real estate agents and businesses selling big ticket items such as luxury boats. Buying property is a popular choice for criminals – it is estimated that around 30% of money laundering activities are conducted through property transactions. Perhaps that explains our property prices!

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