Firms could struggle to meet deadline for money laundering law, expert warns.
Financial institutions may struggle to be ready for new anti-money-laundering laws if they haven't yet begun preparations, a legal expert warns.
PricewaterhouseCoopers advisory partner Eric Lucas said that when Australia introduced similar regulations, implementation took longer and cost more than many expected.
New Zealand's law change comes into force on June 30 and is expected to cost the financial sector close to $230 million in start-up costs and $128 million in ongoing costs.
A 2008 Deloitte report for the Ministry of Justice found banks and the financial advice sector would be the hardest hit, with banks having to cough up $137.5 million initially and $30 million in future costs.
Financial advisers face start-up costs of $50.5 million and incremental costs of $61.6 million.
Under the new law, owners have to assess where they might be at risk of being used to launder money or fund terrorist activities, devise a plan to mitigate those risks and train staff to overcome them. Companies must also appoint a compliance officer.
Lucas said banks and financial advisory firms were exposed through areas such as foreign exchange transactions, and people wanting to bank large sums of money or alter and set up trusts with large sums.
Lucas said the new law would bring New Zealand in line with other countries and businesses had had quite a lot of time to do the preliminary work. The law passed in 2009 with the regulations finalised in 2011.
"If you haven't done a risk assessment by now you need to get started and get it audited and reviewed properly," he said.
Deloitte partner Richard Kirkland said he was concerned about smaller institutions getting up to scratch.
Regulators were still discovering problems up to two years after the law change in Australia, he said.
Lucas said the change could damage a company's brand if it was not handled well.
"One of the things we need to be careful of is customer due diligence. The difficulty will come with one-off transactions where people just turn up with a wallet bulging with cash - people may start taking offence when they are asked where it came from."