KiwiSaver covered by Anti Money Laundering rules
Q. We are a self-employed couple trading through our Family Trust. We would like to set up a direct debit for $90 per month to our KiwiSaver accounts to get the Government top up each year. Because it is a Family Trust bank account, we have been told we have to supply supporting paperwork to the fund manager for Anti Money Laundering compliance (the page of the Trust Deed showing our relationship to it). All the paperwork is with our accountant so this is a hassle right now. Would it be easier just to make an annual payment of $1043 each from our Family Trust bank account using the KSS tax payment option through internet banking?
A. You may be a surprise to you that you have been caught up in the Anti-Money Laundering and Counter Financing of Terrorism Act, which came into effect in 2013. This affects all financial institutions in New Zealand and has required a major overhaul of their processes. The legislation is designed to detect and deter money laundering and terrorism financing. It is also aimed at improving our financial reputation overseas, and meet international expectations from other countries who do business with us.
Under the changes, 1760 financial institutions in New Zealand are now required to conduct due diligence on their customers and regularly report to authorities. KiwiSaver is at the low risk end as far as money laundering is concerned, as funds placed into KiwiSaver are hard to move or use (before the age of eligibility). However, it is caught up in the spectrum of financial activities covered by AML regulations.
Every fund manager must have an AML compliance programme. This is based on guidance from the Financial Markets Authority and any legal opinions they have sought. I asked three fund managers what documentation they require to set up a direct debit into a member’s bank account. Two of the fund managers said they would accept a direct debit from any New Zealand bank account while the third asked for evidence of a connection between the individual and the account (which appears to be the case for you).
Changing your KiwiSaver Scheme to a less rigorous fund manager is not a good enough reason to make the change. The alternative you suggest of using internet banking may be a good solution. You can make payments into any KiwiSaver account using the KSS tax payment whenever it suits you. I asked Inland Revenue if they conducted any AML checks on money paid via internet banking and they replied: “As the central administrator for the KiwiSaver scheme, Inland Revenue does not make any AML compliance demands on KiwiSaver members – only the scheme providers do. We simply pass the contributions from KiwiSaver members or employers on to relevant the scheme providers.” So Inland Revenue leaves it to the various fund managers to conduct Client Due Diligence according to their protocols.
While it may be inconvenient for individuals to comply with AML requirements, there are wider benefits. According to Justice Minister Amy Adams, the reporting of suspicious transactions to New Zealand Police’s Financial Intelligence Unit has increased significantly since the Anti-Money Laundering and Counter Financing of Terrorism Act was introduced. In 2012/13, nearly 12,000 transactions worth $545 million were reported. In 2013/14, this grew to over 86,500 transactions worth NZ$3.5 billion being reported. In the period between December 2013 and May 2015, suspicious transaction reports contributed to four major Police operations in New Zealand, leading to the arrest of 30 people and seizure of more than $220 million worth of drugs and assets.
Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 06 870 3838 or go to www.peak.net.nz. The information contained in this article is of a general nature and is not personalised. Send your KiwiSaver questions to shelley.hanna@peak.net.nz.
Published 5 october 2015