Leading NZ workplace provider issued with DIA formal warning
16 July 2019
The Department of Internal Affairs (DIA) has issued a formal warning under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act) to seven reporting entities within the Regus Management Limited (RNZML) designated business group. The formal warning to RNZML was issued on 13 June 2019.
RNZML, company number 3409672, provides a range of office, co-working and meeting spaces in 24 centres throughout New Zealand, among them, 13 provide virtual office services for customers in New Zealand and overseas. RNZML started as a trust and company service provider in 2014 and has since transitioned to a designated non-financial business or profession under the AML/CFT Act.
RNZML failed to meet AML/CFT Act requirements that include failing to conduct customer and enhanced due diligence, failing to keep records and failing to establish, implement and maintain a current risk assessment and AML/CFT programme. It is not alleged that RNZML was involved in money laundering or the financing of terrorism.
“Criminals may choose to use virtual offices based in New Zealand to trade on our clean reputation no matter where they are in the world,” said Mike Stone, Director of the Department’s AML Group.
“Reporting entities, in particular virtual office service providers that have overseas customers need to hold detailed records on their customers and keep those records up to date. This was the focus of the Department’s regulatory inspection of RNZML over an extended period and we have continually worked with them to improve their AML/CFT compliance.”
The Department required RNZML to take immediate action to rectify all areas where it was non-compliant with its AML/CFT obligations. The Department will continue to monitor the company and consider further enforcement action if it engages in conduct that does not comply with the AML/CFT Act.
This is the first formal warning issued to a designated non-financial business or profession and eighth formal warning to be published as a summary. Since the AML/CFT Act came into force on 30 June 2013, the Department has issued 30 non-public formal warnings, either for failure to meet particular risk assessment or AML/CFT programme obligations or for failing to submit an annual AML/CFT report.
Questions & Answers
What is a formal warning issued under section 80 of the Act?
Formal warnings can be issued when a supervisory agency has reasonable grounds to believe that a reporting entity has engaged in conduct that constitutes a civil liability act. These civil liability acts are specified in section 78 of the Act.
has a formal warning been issued to Regus New Zealand
The formal warning has been issued on the basis that the Department has reasonable grounds to believe that Regus New Zealand Management Limited has:
• Failed to conduct customer due diligence as required by subpart 1 of Part 2 of the Act (section 78(a) of the Act).
• Failed to keep records in accordance with the requirements of subpart 3 of Part 2 of the Act (section 78(e) of the Act).
• Failed to establish, implement, or maintain an AML/CFT programme (section 78(f) of the Act).
What other action can
be taken if a reporting entity does not comply with the
requirements of the
Where reporting entities engage in conduct that does not comply with the requirements of the Act, supervisory agencies have various enforcement actions available to them. This includes civil or criminal action, which could result in (but is not limited to) the imposition of:
• Civil penalties of up to $200,000 in the case of an individual, and $2 million, in the case of a body corporate; and
• Criminal penalties of imprisonment for up to two years or a fine of up to $300,000, in the case of an individual, and $5 million in the case of a body corporate.
There have been two court proceedings under the AML/CFT Act concluded to date, Ping An Finance (Group) New Zealand Company Limited and Qian DuoDuo Limited. Both were civil proceedings and both respondents were money remitters.
• Ping An Finance – pecuniary penalty of $5.29 million plus costs and an injunction against its director from providing financial services
• Qian DuoDuo Limited – pecuniary penalty of $356,000 plus costs