AML: Expired passports guidance

Real estate agents have now been reporting entities under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (‘AML/CFT Act) for just over two years.

A question that often crops up from agents to REINZ is: “A vendor has provided an expired passport, can we use it as part of our CDD (Customer Due Diligence) obligations?”

Amended Identity Verification Code of Practice 2013 (‘the code’)

As agents will know, the code provides best practice for all reporting entities conducting name and date of birth identity verification on their clients. The code is not mandatory, however, it does constitute a safe harbour. If a reporting entity opts out of the code, it must inform its supervisor (the Department of Internal Affairs - DIA) and must adopt practices that are equally effective, otherwise, it risks non-compliance.

Part 1, Section 1 of the code currently refers to a passport as an example of primary photographic identification.

The Passports Act 1992 (Section 2) defines a passport as follows:

“passport means a document that is issued by or on behalf of the Government of any country, and that purports to establish the identity and nationality of the holder; but does not include such a document that has expired or that has been cancelled.”

The AML/CFT supervisors consider the above definition to apply to a valid passport at the time a business relationship is established, and therefore, an expired passport does not meet the required standard for Part 1, Section 1 of the code.

However, Part 1, Section 4 of the code requires reporting entities to have an exception handling procedure in place for circumstances when a customer demonstrates they are unable to comply with the requirements outlined in the code. This means that an expired passport may still be acceptable as an exception handling procedure.

Something to note is that the DIA does not consider that accepting an expired passport on anything other than an exception basis, would meet the threshold of ‘equally effective means’ as mentioned above.

Guidance

The DIA does not consider that there is a ‘maximum’ timeframe of expiry a reporting entity may accept as part of an exceptions handling procedure. Reporting entities should take a risk-based approach based upon the factors present at the time the passport is presented. A riskbased approach should be documented as part of a reporting entity’s AML/ CFT programme, and based upon risks identified in their risk assessment.

Questions that may help you determine the risk:

How can the passport’s validity be determined? Can the relevant issuing authority (i.e. DIA) confirm whether expired passports were genuinely issued?

How long has the passport been expired for? Could the photograph still be relied upon to be a valid likeness of the individual presenting when considering the time elapsed since it was taken?

Why does the individual presenting the expired passport not have access to another form of valid ID i.e. a Driver’s License?

Can the individual presenting the expired passport provide other supporting forms of identification?

Does the individual have any prior history with the agency, or are they seeking to begin a new business relationship e.g. is this a previous vendor you have dealt with or is it a new one?

What is the impact upon not accepting the expired passport in terms of financial inclusion?

What is the risk level of the transaction or activity the individual is seeking to engage in?

Remember, you must ensure that you are satisfied that any identification you accept is reliable and accurate.

Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) regulations

Timeframes to amend the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) regulations have changed. The Ministry of Justice originally aimed to have new regulations in force by December 2020, but this timeframe has been extended to July 2021.

This means that commercial licensees must continue to comply with the current regulations by completing their customer due diligence before undertaking any real estate agency work.

Once regulations are in effect, agents will be able to conduct customer due diligence on the landlord when an offer to lease is presented (rather than when they sign an Agency Agreement).

Audits will move from a two-year deadline to a three-year deadline once the new regulations come into force (1 January 2022 for real estate agents).

Any questions, feel free to email advisory@reinz.co.nz

Amesha Rama, In-house lawyer, REINZ