Virtual office provider Regus warned over anti-money laundering law breach

There are concerns that nefarious companies may try to trade on New Zealand's good reputation. Photo / File

A virtual office provider has been given a formal warning over its failure to meet obligations under anti-money laundering and countering financing terrorism law.

Regus New Zealand Management which provides office, co-working and meeting spaces in 24 locations around New Zealand including 13 virtual offices was issued with a formal warning on June 13 by the Department of Internal Affairs.

Regus failed to meet its AML/CFT requirements including customer and enhanced due diligence, failed to keep records and failed to establish, implement and maintain a current risk assessment and AML/CFT programme, the DIA said in a statement.

Mike Stone, director of the DIA's AML group, said it was not alleging the company was involved in money laundering or the financing of terrorism but there were potential risks from its customers.

"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.

"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 [Regus New Zealand Management Ltd] over an extended period and we have continually worked with them to improve their AML/CFT compliance."

Stone said it required Regus to take immediate action to rectify all areas where it was non-compliant and would consider further enforcement action if the company did not comply with the law.

The warning is the first to be issued to a non-financial business and eighth warning to be made public.

A spokesman for Regus confirmed that it had received a formal warning from the Department of Internal Affairs (DIA) under the AML/CFT Act.

"RNZML is working with DIA and the relevant advisers to achieve full compliance with the Act across the group. It expects to be compliant soon."

Since the AML law came into force on June 30, 2013 the DIA had issue 30 non-public warnings.

It issues a formal warning when it has reasonable grounds to believe an entity has "engaged in conduct that constitutes a civil liability act".

If an entity does not comply the DIA can take further civil or criminal action. Penalties for a civil case are up to $200k for an individual and up to $2 million for a corporate.

For a criminal case they range from imprisonment for up to two years or a fine of up to $300k for an individual or a fine of up to $5 million for a corporate.

Two money remitters have so far been prosecuted under the AML/CFT Act.

Ping An Finance was pinged for $5.29 million plus costs and an injunction was placed on its director stopping them from providing financial services.

Qian DuoDuo received a penalty of $356,000 plus costs.