As indicated by Hon Nicole McKee's announcements regarding the reform of New Zealand's anti-money laundering and countering financing of terrorism (AML/CFT) regime at the end of 2024 (as discussed in our previous article, and Beehive press releases here and here), the first of the three-part work programme is well underway.
The Anti-Money Laundering and Countering Financing of Terrorism Amendment Bill (Bill) was introduced to the House on 18 December 2024 and referred to the Justice Committee after its first reading on 13 February 2025. This Bill, alongside the Statutes Amendment Bill, proposes to make improvements to the current AML/CFT regime so that it is more efficient, effective and consistent.
Part One: legislation for immediate regulatory relief
Anti-Money Laundering and Countering Financing of Terrorism Amendment Bill
Further to our earlier article, the Bill now contains 26 amendments to the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act). The key proposed changes include:
- The removal of mandatory enhanced customer due diligence (CDD) requirements for low-risk trusts
- Updating the definitions of "beneficial owner", "designated non-financial business or profession", and "trust and company service provider"
- Requiring reporting entities to take a risk-based approach to identifying politically exposed persons by having a risk management system in place
- Prohibiting international wire transfers that do not include the required identification information
- Replacing "unable to" with "does not" in the context of the prohibitions on reporting entities if CDD is not conducted, to ensure that there is a clear prohibition in circumstances where CDD is not conducted
- Requiring reporting entities to produce records "swiftly" when required under the AML/CFT Act or any other enactment.
Submissions on the Bill are open until 28 March 2025.
Statutes Amendment Bill
The Statutes Amendment Bill is an omnibus bill which includes the following proposed amendments to the AML/CFT Act:
- Clarifying the definition of "occasional transaction" which excludes cheque deposits made at a registered bank or non-bank deposit taker
- Clarifying that an address only has to be verified by a reporting entity according to the level of risk involved
- Extending the time law firms must provide suspicious activity reports to the Commissioner of Police from three to five days
- Extending the time reporting entities must report certain prescribed transactions from 10 to 20 working days.
The Statutes Amendment Bill is currently at Select Committee stage, and the Governance and Administration Committee's report is due on 17 April 2025.
Parts Two and Three: structural changes and meeting international standards
The Cabinet materials proactively released earlier this month indicate that parts two and three of the AML/CFT work programme are also progressing.
Part Two
Part two will focus on structural changes, in particular:
- By replacing the three-supervisor model and establishing the Department of Internal Affairs as the single supervisor for the AML/CFT regime
- Introducing a hybrid funding model which would consist of an AML/CFT levy paid by reporting entities and Crown funding.
Part Three
The Financial Action Task Force (FATF) sets international standards and regularly monitors the AML/CFT systems of its member countries through mutual evaluations to ensure effectiveness and technical compliance. Countries with significant deficiencies are "grey-listed" (or even "black-listed" for high-risk jurisdictions) which means that they are expected to actively resolve such deficiencies and are subject to increased monitoring. It is important for New Zealand to commit to the FATF standards as non-compliance can result in significant economic consequences such as restrictions on transactions and financial sanctions.
New Zealand's latest evaluation identified some notable deficiencies, and part three of the reform work programme aims to improve New Zealand's regulatory settings to mitigate the risk of "grey-listing". It has been noted that the proposed changes must be in effect by 2026 to be considered in New Zealand's next FATF evaluation, likely to be in 2028 or 2029.
Next steps
Going forward, we can expect:
- A bill to implement part two to be introduced by March/April 2025
- Cabinet policy decisions on part three to be made by April 2025
- Cabinet approvals for AML/CFT levy regulations by May 2025
- The Justice Committee's report on the Bill to be published by 13 August 2025
- A bill to implement part three to be introduced by April 2026.
If you would like to make a submission on the Bill, or discuss any aspect of the AML/CFT reforms, please contact our financial services regulation team.
This article was co-authored by Rebecca Green (special counsel), Thomas Carr (solicitor) and Laura Sahng (solicitor).
