Enhanced Customer Due Diligence

Enhanced Customer Due Diligence

NZ legislation outlines situations when ‘Enhanced’ customer due diligence is required. These are situations with a higher likelihood (internationally) of money laundering and terrorist financing occurring. NZ enhanced CDD requirements are inline with recommendations from an international body called the Financial Action Task Force (FATF).    

When Enhanced Customer Due Diligence is needed

With 2Shakes you get a checklist of factors for Enhanced Customer Due Diligence. If you select one, 2Shakes records the CDD level as Enhanced.  2Shakes also provides ‘help’ to suggest what you should do.  

Where the money came from (Sow & PoF)

The key difference between Standard CDD and Enhanced CDD is you ALSO need to identify where the money came from. This is know as the Source of Wealth (SoW) or Proof of Funds (PoF). For example, if a Trust owns a house, it might be the sale and purchase agreement. If the Trust owns shares in a business, then it might be the companies financial accounts.  

2Shakes allows you to record when SoW or PoF has been collected, what it was, and then securely store it in our cloud platform. From mid May 2021, a SoW/PoF checkbox will help you to track if the SoW/PoF have been collected.  

2Shakes assists you to collect SoW/PoF evidence by providing your customers the option to upload SoW/PoF files into a secure location.

Trusts

While there are various factors that trigger Enhanced CDD, the most common reason in New Zealand is when your customer is a Trust. As well as SoW/PoF, you need to record additional information.  You can find out more about Trusts here. 

Checking its all in order

2Shakes lets you see at any point in time what state a customer’s CDD is in. You can see what is outstanding, which people haven’t completed identity verification, if PEP checks are missing, or if you’re missing source of funds.  

For Enhanced CDD, make sure you consider the following:

  • If its a Trust – do you have the Trust deed.  Have you considered who from the trust needs to be ID verified (Trustees, Settlor, Beneficiaries).

  • Have you identified and recorded where the customer’s Wealth or Funds come from. Have you sighted or uploaded a copy of the SoW or PoF.

  • Has Identity verification been completed for all people.  Have you completed address verification and PEP checks for all people

  • Has the Risk Assessment and the ‘Nature of Business’  been collected and recorded.

The Compliance Officer can then review the CDD information, and approve it as completed, so you can provide the Trust with AML captured services.

Remember - it's not personal!

Doing Enhanced CDD does is NOT automatically mean you (or your customers) are untrustworthy or criminal!  It’s really NOT personal.  The reason you need to carry out Enhanced Due Diligence is that (internationally and statistically) these situations have a higher chance of being associated with Money Laundering.  Think of it like this, small children in NZ need to sit in a child safety seat in a car.  It’s not a personal judgement of anyone’s driving.  It’s not a slur on their character.  Great driver or terrible driver – you must use a car seat.  It’s the same thing when it comes to Enhanced Customer Due Diligence.  If it applies, it applies.  Saying you don’t need to do Enhanced CDD on a trust because they have an excellent reputation is a a bit like a driver telling you they don’t need to put their toddler in a car seat because they are an excellent driver…     

NZ wants to make it hard for criminals to clean their money here.  One of the ways to do that is to make sure all movement of money in NZ is legitimate.  Which is why in some situations the Due Diligence is Enhanced.

More Help

Didn’t find what you need here? You can find lots more help on our main Support Page.

Or you can contact us or email us at support@2shakes.co.nz and we can help you with what you need to know.

Thanks very much,
The 2Shakes Team