NEW ZEALAND, 7 July 2023 – Hills Real Estate recently received a formal warning from the Department of Internal Affairs (DIA) for non-compliance with the Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT). This is the second warning issued to a real estate agency within two months, with Arizto receiving a similar warning in June. Property Brokers, another agency, had also been formally warned back in January 2021.

“Evidence suggests an increasing tendency among criminals to exploit the New Zealand real estate sector for money laundering,” states Ardi Melikian, Director at Verify 365, a Sydney-based risk and compliance AML technology provider. “In the fiscal year ending June 2022, 100 properties worth $73.7 million were seized by law enforcement, a significant increase from the 51 properties valued at $55.7 million seized in the previous year.”

According to Mike Stone, Director of the AML/CFT Group at the DIA, the real estate sector currently falls under the medium to high-risk category for money laundering and terrorist financing. Hills Real Estate’s shortcoming was identified in establishing, implementing, and maintaining an AML/CFT programme. The agency also failed to conduct ongoing customer due diligence, identify potential suspicious activity, and maintain proper records as per the AML/CFT Act.

The formal warning to Hills was delivered on May 8. However, Hills’ principal and branch manager, Anjini Lata, assures the agency’s compliance with the Act. “We have submitted a rectification plan to the DIA on May 15, highlighting the actions we’ve taken to address our shortcomings,” says Lata. “Our office is always open to DIA officials for any compliance checks.”

Lata attributes the non-compliance to the failings of a previous compliance officer and lost records during a change in anti-money laundering software providers. “After a new compliance officer joined us on April 1, we have strengthened our procedures to ensure compliance,” Lata says. “Our partnership with AML/CFT specialist The Tic Company also fortifies our commitment to adherence.”

As Ardi Melikian of Verify 365 puts it, “Such formal warnings are not just about paperwork. Real estate agents play a vital role in preventing money laundering. Adherence to AML/CFT regulations is critical to maintaining trust in the sector and supporting the financial system’s integrity.”

Stone echoes this sentiment and warns that real estate agencies should expect stronger enforcement actions for serious AML/CFT Act breaches. He reaffirms the AML/CFT group’s commitment to maintaining public confidence in the real estate sector and enhancing New Zealand’s international reputation.

Operating branches in Papakura, Takanini, and Botany Junction, Hills Real Estate has until August 3 to demonstrate full compliance. The agency has been actively working towards this deadline since DIA’s initial inspection last November.

“The DIA will continue to monitor Hills Real Estate’s actions closely and publish an updated risk summary for real estate agents later this year,” adds Stone, who also highlights that Property Brokers have been diligently addressing their concerns.

Ardi Melikian underscores the importance of technology in assisting real estate agencies in maintaining AML compliance. She added, “Real estate agencies across Australia and New Zealand are increasingly turning to technology solutions like Verify 365 to help them perform essential ID and AML checks more efficiently. Our platform is designed to streamline the compliance process, ensuring all necessary due diligence is conducted effectively. Staying compliant isn’t just about avoiding penalties — it’s about playing a key part in the broader fight against financial crime and protecting the integrity of our legal and financial systems.”