Talk to anyone involved with property transactions and they’ll almost always start moaning about the AML/CFT obligations.

The what?! Lay off the acronyms, Cam!

The Anti-money Laundering and Countering the Financing of Terrorism obligations.

Come again? 

Whenever you engage in a property transaction you’re going to be required to identify yourself and provide documentation to prove it. It’s designed to detect and prevent money laundering and stop terrorists being able to fund their nefarious activity. The regulations come with good intentions… and a lot of legwork. 

What does it mean for you?

Typically you need to do identify yourself three times – once for the real estate agent, twice for the bank, and finally for the lawyer.

For most people it’s easy because it’s just photo ID and proof of residential address only. 

For others (myself included) it’s more complicated. I’ve got a family trust, so I also need to:

  • Identify my brother in law because he is a co-trustee
  • Provide a copy of the trust deed and any amendments 
  • Outline where the trust obtained its wealth from and provide of proof of how it was obtained

In my case it means handing over my business accounts, my wife’s payslips and accounts for the trust itself. The trust needs an IRD number too. That’s quite a bit of effort just to prove I’m legit. 

If I were borrowing in the name of a company (many property investor clients do it this way), then I’d need to do the above for the company itself and its directors, as well as myself and my wife as individuals.

In a couple of cases, last year a client had a trust and a company involved in a property transaction, and yes you guessed it, the AML/CFT paperwork was nearly 2 inches thick for them! You could’ve blocked a dunny with all of it.

The last time I purchased a property myself was 2013 and these requirements weren’t as onerous back then. In fact, I don’t think they even existed!

There are also a bunch of forms which confirm your tax residency status (and again these are for you as an individual and for the trust or company and for the people who run the trust or company).

Now it’s one thing to tell my clients to expect some pain in this situation. But it’s quite another to go through it yourself. 

Far out. 

It is frustrating. It definitely feels like these requirements are getting in the way of lawful business and normal people simply trying to get ahead. The detail can easily trip you up. I do this often enough and it still trips me up. 

Frankly, getting the mortgage is often easier than getting through these obligations.

But if you want to buy property you cannot avoid this. Take a deep breath and roll with it, right? 

About Campbell Hastie

Cam is one half of Auckland based mortgage brokers, The Go 2 Guys.

He makes a living by sharing what he knows about mortgages with people, arranging mortgages for people and then insuring people.

He doesn't claim to know everything about mortgages himself which is why he teamed up with David Mercer — hence the ‘2’ in Go 2 Guys.

He writes posts regularly on his blog and has been told he has an ability to share his knowledge in a simple and sometimes memorable way.

Feel free to comment and ask any questions. Contact Campbell Hastie m: 027 697 7789.

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