Big cash deals could point to crime, estate agents warned

Howard Morley

Real estate agents are being warned about house buyers wanting to settle big deals in cash - they could be laundering the proceeds of crime or financing terrorism.

Real Estate Institute president Howard Morley said yesterday an alert would be issued to the country's 16,000 agents, saying they should contact authorities if house buyers made large one-off cash payments.

That could include seeking to pay a deposit in cash. House deposit payments were rarely settled in cash, he said. Most buyers used electronic funds transfer.

Although large one-off cash payments did not necessarily signal a criminal involvement, Mr Morley said agents should be careful.

Associate Minister of Justice Clayton Cosgrove released a discussion document last week on enhancing measures to counter money laundering and the financing of terrorism.

An overhaul of the Financial Transactions Reporting Act 1996 is proposed to bring New Zealand into line with other countries. But Mr Cosgrove said the net needed to be widened beyond the financial sector to include, among others, lawyers, accountants, real estate agents, casinos and jewellers.

Feedback has been sought from various industries.

Mr Cosgrove said although there was no evidence of terrorist financing in New Zealand, it was important to have a system which could not be exploited by people looking for avenues through which to move illicit funds around the globe.

A Ministry of Justice document on the changes specified a new measure for those handling large amounts of cash to undertake customer due diligence, a process in which customers were identified and verified.

"It is proposed that customer due diligence requirements currently limited to cash transactions of $10,000 or more be extended to non-cash transactions of that value and to all transactions carried out on behalf of someone else," the ministry said. "There will be a requirement for ongoing customer monitoring to identify transaction patterns that could indicate money laundering and terrorist financing."

Auckland lawyer Brian Gubb said house deposits were paid via bank cheques deposited into real estate agents' trust accounts and were rarely in cash.

"It's 30 or 40 years since people paid deposits with a suitcase full of cash," he said, although attempts had been made to use drug money to buy houses with cash.

Mr Morley said estate agents would welcome the discussion because it could ensure more detailed record-keeping and report requirements. That would protect people in the real estate market when large amounts of money were being exchanged, he said.

"The institute believes these changes will result in even more protection for people when using a real estate agent as it is simply another level of security," he said.

Submissions on the document close at the end of next month.


CLEANING UP

The Ministry of Justice says the most common money laundering methods are:

* Smurfing: Depositing cash in smaller amounts to hide the full amount of money.

* Currency smuggling: Moving funds across borders to disguise their true source.

* Buying assets with cash: Cars, houses, or boats in someone else's name.

* Gambling: Using dirty money to gamble, then exchanging winnings for a casino cheque.

www.justice.govt.nz