Earlier today, on 23 October 2024, the associate Minister of Justice announced an overhaul of the New Zealand anti-money laundering and countering financing of terrorism (AML/CFT) regime, moving to a single supervisor model and introducing a new funding model for the system. This announcement follows from a previous announcement by the associate Minister that the Government is looking at reforming the New Zealand AML/CFT regime.
Presently, the AML/CFT regime has three supervisors (the Reserve Bank of New Zealand (RBNZ), the Financial Markets Authority (FMA) and the Department of Internal Affairs (DIA)) and which supervisor is allocated to an individual reporting entity is based on the nature/relevant activities of that reporting entity. Moving forwards the DIA will be the sole supervisor of the AML/CFT regime.
This change has reportedly been made in light of the Financial Action Task Force's evaluation of the New Zealand AML/CFT regime and review of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (the Act), and these options were considered and discussed in the statutory review of the Act by the Ministry of Justice completed in November 2022.
The associate Minister expects that this change will:
- "Improve the efficiency of the [AML/CFT regime]
- Establish a more risk-based approach
- Enable more timely provision of guidance and support".
The new "sustainable funding model" will involve an industry-levy. Details on how the levy will be calculated or charged are not yet available, however the associate Minister specifically stated that "the levy will be designed to ensure that costs are equitable and reasonable for the sector and will not place undue burden on small businesses".
Our view
This is a significant change for all current and prospective reporting entities under the Act and one that, in our view, should be welcomed. This change also brings the New Zealand AML/CFT regime closer in line with Australia, who has had a dedicated single AML/CFT regulator since 1989.
In terms of specific benefits to reporting entities, we expect that a single regulator, and the consolidation of regulator expertise, should support:
- Greater consistency of interpretation of provisions of the Act and accompanying regulations – in the past the differing regulator views and approaches have caused challenges for the industries they respectively supervise
- Higher quality, more timely and more consistent guidance – given that guidance will not need to be circulated and approved across three different entities, who all have other various other roles
- More dedicated technical support for reporting entities – given that AML/CFT expertise will be consolidated in the DIA.
Next steps
There are a number of details in relation to these changes that are yet to be fleshed out, including when these changes will take place, how the transition will operate for those reporting entities currently supervised by the RBNZ and FMA and when the levy will commence for AML/CFT participants.
We will continue to provide updates on further developments of both the change to a single supervisor model and the overall reform of the New Zealand AML/CFT regime. If you would like to discuss these reforms or any aspect of the New Zealand AML/CFT regime, please get in touch with our financial services regulation team.
This article was co-authored by Andrew Suggate (senior associate) and Thomas Carr (solicitor).
