Independent audit obligation
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22 June 2020
The AML/CFT Act requires all reporting entities to complete an independent audit every two years. The audit obligation is a systematic check of a reporting entity’s AML/CFT programme. It will assess whether the AML/CFT programme is functioning in practice and that the policies, procedures and controls in place are based on the money laundering and financing terrorism risks identified by that business.
The audit guideline published by the three AML/CFT supervisors refers to a reciprocal audit. We have developed some guidance for reporting entities supervised by the Department which expands and clarifies what a reciprocal audit is and when it may be an appropriate consideration for a business. There are some risks with undertaking a reciprocal audit and the Department considers a reciprocal audit appropriate for very few reporting entities. You can request a copy of this guidance by emailing us at amlcft@dia.govt.nz
Cabinet has agreed to introduce a new regulation to extend the default time frame for AML/CFT independent audits from two years to three years. The implementation of these regulations is the responsibility of the Ministry of Justice and until the new regulation comes into force reporting entities must comply with the current obligation to complete an independent audit every two years.
The Ministry of Justice advises us that they propose to have the new regulation in force by 31 December 2020. This would mean:
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Law firms, conveyancers, and new Trust and Company Service Providers are required to have their first independent audit completed by 30 June 2020. i.e. no change to the current timing.
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Accountants and bookkeepers are required to have their first independent audit completed by 30 September 2020. i.e. no change to the current timing.
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Real estate agents’ first independent audit would not be due to be completed until 31 December 2021 i.e. the independent audit due date for real estate agents would be extended from 31 December 2020 to 31 December 2021.
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For any reporting entity that has already completed its first or a subsequent independent audit when the new regulations are implemented, it will have three years from the date of the last independent audit to complete the next one.
The Department recognises that COVID- 19 may have had an impact on meeting the independent audit obligation. Please refer to our April announcement (PDF, 324KB) as this remains valid for reporting entities supervised by the Department.
