On 30 August 2024, the Government released a cabinet paper that included, amongst other related proposals, a bill proposing amendments to the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act).
These proposed amendments follow the Ministry of Justice's (MoJ) 2022 statutory review of the AML/CFT Act and resulting report which contained over 200 recommendations for amending the AML/CFT regime. The proposed bill will make 25 amendments, with the Government proposing to address the remainder of MoJ's recommendations in future legislation.
Among the most significant amendments are:
- Removing requirements to verify information on source of funds and source of wealth when conducting enhanced customer due diligence (CDD) on low risk trusts
- Implementing an explicit prohibition on international wire transfers that are not accompanied by required information
- Altering the language in the Act requiring reporting entities to "have regard" to certain factors when conducting a risk assessment, to require reporting entities to take into account these factors to a greater extent.
The proposed bill is intended to be introduced to Parliament by December 2024.
What has happened?
The cabinet paper proposes to make 25 amendments to the AML/CFT Act. We have set out the most significant changes below:
- Removing the requirement to verify source of funds or source of wealth information when conducting enhanced CDD on trusts if satisfied that verifying this information would not mitigate risks identified from conducting standard CDD
- Explicitly prohibiting reporting entities from conducting international wire transfers that are not accompanied by the required information, including beneficiary (ie the person receiving the funds) information
- Changing risk assessment requirements so that rather than requirements to "have regard to" the factors in section 58(2) of the AML/CFT Act in conducting risk assessments, reporting entities are required to take these factors (including government risk assessments) into account to a greater extent
- Amending section 78 to explicitly include three compliance breaches as civil liability acts: failing to submit a suspicious activity report, failing to submit an annual report, and failures in respect of a risk assessment
- Removing "only to the extent that" from section 6(4) to clarify that reporting entities that are captured as both a financial institution and a designated non-financial business or profession (DNFBP) are required to comply with the AML/CFT Act in respect of both
- Amending the definition of a trust and company service provider in the AML/CFT Act to prevent dual capture as both a financial institution and a DNFBP
- Providing a definition of "money or value transfer service" (MVTS) in section 5 of the AML/CFT Act
- Amending the "beneficial owner" definition in the AML/CFT Act to be consistent with the AML/CFT (Definitions) Regulations 2011, ie to explicitly include a person with ultimate ownership or control and to specifically exclude a customer of a customer
- Specifying the timeframes for record-keeping provisions within which businesses are required to produce records upon request
- Removing "effective" from the requirement for correspondent financial institutions to assess and ascertain that the respondent's AML/CFT controls are "adequate and effective"
- Requiring compliance officers to be senior managers or report to senior managers
- Replacing "is unable to" with "does not" in section 37 of the AML/CFT Act to clarify that the prohibitions in that section will still apply to a reporting entity if it merely chooses not to conduct CDD.
Who does this affect and what are the impacts?
These changes will have varying impacts for all reporting entities and may be more significant for reporting entities conducting wire transfers or enhanced CDD on trusts, and reporting entities conducting a new, or updating an existing, risk assessment.
If you are a reporting entity we recommend you familiarise yourself with the proposed amendments and consider their impact on your business. If you wish to discuss any of the proposed amendments, or any aspect of the AML/CFT regime, please get in touch with our financial services regulation team.
