Learn about the regulations underpinning our CDD practices, and what identifying information you may be required to provide when making an investment with Icehouse Ventures.
Background
The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act) places obligations on a number of New Zealand businesses, institutions, and organisations to detect and deter money laundering and terrorism financing.
Money laundering and terrorism financing are two closely related concepts. The former refers to the process of making illegally obtained funds appear legal by concealing their true origin and the latter involves providing financial support to individuals or groups involved in terrorist activities.
Customer Due Diligence
The AML/CFT Act ensures relevant firms undertake 'customer due diligence' (CDD) to guard against money laundering, in particular by verifying the identities of their customers (or in the case of complex entities like companies and trusts, the people who control those).
Hence, the purpose of CDD is to ensure that businesses have a clear understanding on who their customers are and the nature and purpose of their financial activities.
There are three main forms of CDD - standard, enhanced and ongoing. This article will discuss standard CDD versus enhanced CDD. For more information on ongoing CDD, you can read our article here.
Icehouse Ventures is legally required to conduct CDD on all investors that we onboard onto our platform. How extensive the CDD process is will depend on the entity you wish to onboard (i.e., more complex entities such as Trusts and Companies require us to collect more information than customers investing in their own name).
Standard CDD
Standard CDD typically involves obtaining and verifying customer identification information such as name, date of birth, and address against identification documents (such as passport or driver's license). To conduct CDD, customers are required to supply the following documentation:
Read below for more information on certification.
Standard CDD is employed on all beneficial owners (this concept includes 'controlling persons') of the legal entity investing as well as anyone acting on behalf of the legal entity (e.g., accountants or solicitors who are directly involved in the legal activity of the customer or provide instructions to the customer).
The beneficial owners are identified on the guidance below:
- If the investing entity is a Company: a beneficial owner is any person who owns more than 25% direct shareholding of the Company as well as all Directors of the Company.
- If the investing entity is a Trust: a beneficial owner is anyone who is named as a Trustee of the Trust.
Enhanced CDD
Undertaking a standard CDD process will collect enough information to then determine if enhanced CDD is required. Enhanced due diligence is therefore defined as the catch-all for anything more than standard CDD. The purpose of enhanced CDD is to essentially verify the legitimacy of funds and wealth.
Below is the list of customer types for which it is mandatory to undertake enhanced CDD practices under the AML/CFT Act:
- Trusts
- Vehicles holding personal assets
- Non-residents from countries with insufficient AML/CFT practices
- Companies with nominee shareholders or directors
- A nominee general partner
From the list above, Trusts are the most common investor entity type that Icehouse Ventures regularly deals with. In addition to the standard CDD procedure above that must be carried out on all beneficial owners (i.e. Trustees) of the Trust, we are also required to collect the below to ensure we have a full and complete understanding of the customer:
Note for Source of Wealth: alternatively you can provide any of the documents referred to here, depending on your specific context.
Proof of Shareholding:
Note, if a customer's investing entity is a Company or is a Trust that has a company as a Trustee, enhanced CDD requires us to collect proof of shareholding. For NZ registered companies, this information will be publicly available on the Companies Office, but if not, the customer will need to provide this documentation.
Certification
The certifier must view the original document, compare it with a scanned or photocopied version, and then provide a written statement that "the documents provided are a true copy and represent the identity of the named individual".
The certifier's statement must include their name, occupation, signature and the date of certification. An example of this is below:
The certifier must be one of the below:
- NZ Police Constable
- Justice of the Peace
- Lawyer
- Notary Public
- NZ Chartered Accountant
- Member of Parliament
And must also meet the below conditions:
- Be at least 16 years of age
- Cannot be your spouse or partner
- Cannot be related to you
- Cannot live at the same address as you
- Cannot be involved in the transaction or business requiring certification
To ensure a seamless and highly secure process, Icehouse Ventures employs an AML agent (First AML) to manage the collection of customer information, so far as it relates to the CDD process. If you're interested to learn more on this, read our help desk article 'What does the AML verification process entail (in the context of onboarding)?".
If you have any questions, please don't hesitate to reach out to our Operations Team - we'd be happy to help : )