Wire Transfer Obligations

A wire transfer is a transaction to transfer funds by electronic means (including instructions sent via the SWIFT network or by internet-based systems). Under the Anti-Money Laundering and Counter Financing of Terrorism Act (AML/CFT Act), you must develop and implement appropriate policies, procedures and controls in your respective capacity as an Ordering, Intermediary, and Beneficiary Institution in a wire transfer.

This post provides useful information on wire transfers, and it highlights your obligations. In particular, some new obligations have arisen from the recent regulatory amendments. The last section of this post addresses such new obligations.

Definitions

Electronic transactions made on behalf of customers that are accompanied by payment instructions are wire transfers where the payment is to be made to an account, facility or other arrangement at another institution. The parties of a wire transfer are the Originator and Ordering Institutions, the Intermediary Institution, and the Beneficiary and the Beneficiary Institution.

Let’s see what these terms mean in turn:

The Originator is the person for whom the Ordering Institution is carrying out the funds transfer. This is also referred to as the Payer in the AML/CFT Act. This is the person who authorises the wire transfer by giving the instructions.

The Intermediary Institution is a person (usually a financial institution) who participates in a transfer of funds, but is not an Ordering Institution or a Beneficiary Institution. The Intermediary Institution receives and transmits the wire transfer to the Beneficiary Institution or to another Intermediary Institution.

The Beneficiary Institution is the person (usually a financial institution) who receives the wire transfer from the Ordering Institution, directly or indirectly through an Intermediary Institution and then makes the funds available to the Beneficiary. In other words, the Beneficiary (sometimes referred to as the Payee) is the person who is identified by the Originator as the receiver of the funds that the Originator instructs the Ordering Institution to transfer.

Cross-Border and Domestic Wire Transfer

We can distinguish between two types of wire transfer:

• Cross-border wire transfers are wire transfers where the Ordering Institution, the Intermediary Institution, and the Beneficiary Institution are not all in New Zealand.

• Domestic wire transfers are wire transfers where the Ordering Institution, the Intermediary Institution, and the Beneficiary Institution are all in New Zealand.

There are different requirements if you are acting as an Ordering, Intermediary or Beneficiary Institution and there are also some differences in the case in which you are processing a cross-border wire transfer or a domestic wire transfer. These requirements are called enhanced customer due diligence (CDD) and are discussed next.

Enhanced Customer Due Diligence

You must conduct enhanced CDD in accordance with Sections 27, 27A and 28 of the AML/CFT Act, in the case you are an Ordering, or Beneficiary Institution for a wire transfer of $1,000 or more for a customer or as part of an occasional transaction. CDD requirements for wire transfers are designed to enable information on the parties to a wire transfer to be immediately available so as to hinder the anonymous use of wire transfers for money laundering and financing of terrorism. The information that must be collected about the Originator and Beneficiary is to be included in the payment instructions that accompany the wire transfer.

Enhanced CDD for wire transfer is a separate requirement as compared to the enhanced CDD under Sections 22, 22A, 23, 24 and 25 of the AML/CFT Act (you can read more about enhanced CDD here). For example, if a trust-type customer requires to use your services for a wire transfer of $1,000 or more, you must apply enhanced CDD in the sense that you need to collect:

• source of funds/wealth of the customer; and

• the wire transfer information described below.

Ordering Institution

When acting as an Ordering Institution, you must ensure that wire transfers of $1,000 or more are accompanied by the required Originator and Beneficiary information.

For cross-border wire transfer, you must obtain the Originator’s name, account number, and at least their address, date of birth or another unique identifier. You must also obtain the Beneficiary’s name and account number or transaction reference.

For a domestic wire transfer, you are not required to collect the Beneficiary’s information.

In either cross-border or domestic wire transfers, you must verify information on the Originator using reliable and independent sources. For example, to verify the Originator’s name and date of birth, you would request them to provide you with their passport. However, you are not required to verify the Beneficiary’s information. This means that you need to ask the Beneficiary to give you their name and date of birth – for example – but you are not required to verify such information through their passport.

Intermediary Institution

When acting as an intermediary institution, you must ensure that all information that accompanies a wire transfer is retained with it when transmitted to another Intermediary Institution or Beneficiary Institution.

Beneficiary Institution

When acting as a Beneficiary Institution, you must ensure that the wire transfer received is accompanied by all the relevant information. If this is not the case, you must consider whether submitting a suspicious activity report is appropriate.

Moreover, you must conduct the appropriate level of CDD on the Beneficiary of the wire transfer received (you can read further information on CDD here and here).

Prescribed Transaction Reporting

In the case in which you are acting as an Ordering or Beneficiary Institution and conducting a cross-border wire transfer of $1,000 or more, you are also required to submit a Prescribed Transaction Report (PTR) to the Financial Intelligence Unit (FIU) of the New Zealand Police. You must submit a PTR as soon as practicable but no later than ten working days after the transaction. PTRs must be in prescribed form and they must be submitted through the GoAML portal.

To ensure you identify all inbound cross-border wire transfers requiring a PTR, you should have policies, procedures and controls in place to determine which payments into your trust account have originated from overseas.

Amendment Regulations

In July 2023, several amendment regulations were released. The amendments will enter into force in stages. Below, we indicate how the amendment regulations impact wire transfer provisions. The amendments are organised on the basis of when they are entering into force, so that you can be aware of what you need to prioritise.

July 2023

If you are a designated non-financial business or profession (DNFBP) and you make/receive a wire transfer to/from your trust account held with another reporting entity on behalf of a customer, you are not to be considered an Ordering, Beneficiary or Intermediary Institution. This applies to both domestic and international wire transfers. In other words, the enhanced CDD requirements for wire transfers set out just above do not apply to DNFBPs.

Notwithstanding the exception, in the case in which a cross-border wire transfer made/received is $1,000 or more, your PTR obligations remain in place. When submitting the PTR you are required to include any unique identifier. This means any transaction reference provided by your bank that is specific to that transfer. This assists the Police in matching your PTR with the PTR submitted by your bank.

Also, note that the enhanced CDD DNFBP exclusion from the wire transfer provisions does not change any other of your CDD requirements under the Act. In particular, you are still required to carry out all other applicable requirements relating to your customer (if they are a party to a wire transfer), such as CDD, ongoing CDD and activity monitoring. 

June 2024

Several amendments may impact you from June 2024:

• When you are acting as an Ordering Institution of an international wire transfer below $1,000, you would be required to accompany the wire transfer with the enhanced CDD information listed above.

• If in the case of a cross-border wire transfer, you are required to submit a Suspicious Activity Report to FIU, you must also notify the FIU of any other affected country.

• As an Intermediary Intuition, you must develop policies, procedures and controls in case you receive a wire transfer with insufficient information on the Originator and Beneficiary.

• Cross-boarder virtual asset transfers – virtual asset to virtual asset, and virtual asset to fiat and vice versa – are to be considered international wire transfers.

• You will be required to keep records of:

  • Wire transfer information, in the case of technical difficulties when acting as an Intermediary Institution.

  • Beneficiary’s information.

  • PTRs.

What’s next

Still usure on your wire transfer obligations? Get in touch and we will be able to help you!