Major Changes to New Zealand’s AML/CFT Framework

The Ministry of Justice released a statutory report in July 2022 after examining the “Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (Act).” Since then, various recommendations have been imposed, such as introducing amendments to regulations according to the Act.

These modifications have been implemented in three phases. The first phase was introduced on July 31, 2023, and the second on June 1, 2024. The third and final phase is expected on June 1, 2025.

Additional Recommendations Call for Legislative Amendments

The act needs amendments for the remaining Recommendations. The Government of New Zealand has published a “cabinet paper” in response. That paper outlines the suggested “proposal” to present a “bill amending the Act (Amendment Bill).”

There are “twenty-five suggested changes” to the Act. All the suggested changes can be accessed in “Appendix 4 of the cabinet paper (from page 56 onwards).”

Key Changes Proposed in the Amendment Bill

The key amendments in the Amendment Bill include:

Removing Enhanced CDD Requirements for Low-Risk Trusts

• This change will remove the compulsory requirement of “enhanced customer due diligence (CDD)” on trusts that pose low risks, such as “New Zealand family discretionary trusts.”
• All trusts, whether they pose high or low risk, must perform enhanced CDD now. Information such as collecting data about wealth and funds’ origin is a requirement in enhanced CDD.
• Authorities that deliver reports don’t have to gather information for low-risk trusts if they believe standard CDDs are enough to manage risks.
• This will reduce the extra burden on reporting authorities and direct their attention mainly to higher-risk trusts.
• This approach will suit New Zealand’s trust ecosystem as it will promote a focused risk-based approach in CDD based on risk levels,

Prohibition on Incomplete International Wire Transfers

• The proposed amendments depict a loophole in the now-implementing framework of international wire transfers.
• The regime currently stops wire transfers if the sender’s information is missing.
• There are no specific rules that stop wire transfers when the receiver’s information is missing.
• The newly proposed modification includes laws for both “Originator and Beneficiary,” and the wire transfer will be prohibited if one of the information is missing.
• These suggested amendments will improve the strength of “AML regulations” regarding international wire transfers by including data about both parties.

Redefining ‘Trust and Company Service Provider’

• Right now, some businesses are categorized as “financial institutions (FIs)” and “designated non-financial businesses or professions (DNFBPs)” under the definition of “trust and company service provider.”
• This definition will be modified to avoid overlapping and prevent businesses from being included in both categories.

Updating the Definition of ‘Beneficial Owner’

• An amendment will be made to the definition of “beneficial owner” that will only list a person who owns the company or has ultimate control over all operations.
• This new definition will remove the clients from the beneficial ownership list.
• The upgraded term will align with the Parliament’s intention.

Read Also:

• Preparing for FINTRAC’s New AML Regulations Effective October 2024
• Australia’s AML/CFT Law Tranche 2 Expanding Compliance Requirement
• IMC Strengthens Singapore AML Regime with Proactive Prevention, Timely Detection, and Effective Enforcement

New Record-Keeping Time Frame Guidelines

• The main goal of the amendment is to set timeframes for reporting entities to keep the records for a specific duration.
• A particular set time limit will remove the confusion  of entities with the word “immediately accessible.”
• The time frame will follow FATF’s requirements, which state that records must be provided “swiftly.”

New Requirements for Risk Assessment Procedures

• Another amendment is suggested to change the wording of the Act regarding risk assessment requirements as reporting authorities “consider” specific points when a risk assessment is performed.
• Reporting bodies consider the government’s suggested advice but don’t accept the government’s decision about risks present at the national and sector levels.
• That is why they can’t apply AML controls effectively.
• The suggested amendment will use proper wording so businesses can take the government’s advice seriously considering risks.

Classifying Three Compliance Breaches Under Civil Liability

This change is intended to ensure that the AML/CFT supervisors can take appropriate action against reporting entities that deliberately do not comply with these obligations.

According to the suggested amendment, three types of compliance failures will be listed as civil violations.

• Unable to submit a suspicious activity report on time.
• Failed to present a report annually.
• Unable to conduct risk assessment effectively.

This change will make AML/CFT authorities take action against reporting authorities who do not intentionally follow the compliance requirements.

No Longer Requiring Correspondent Banks to Review Respondent Banks’ AML/CFT Controls

• Right now, a “correspondent bank” must evaluate the AML/CFT framework of the respondent bank to make sure they are “adequate and effective.”
• The proposal suggested keeping the first requirement but skipping the latter one, as banks can’t check the“effectiveness of other banks’ AML/CFT controls.”

Amendment Bill Timeline and Compliance Challenges

• The “Amendment Bill” will be officially introduced in the parliament in December 2024, before the first scheduled date of 2026.
• Although stakeholders accept suggested changes, these changes still do not fully address all recommendations, and more improvements will be required to integrate them in the upcoming years.
• This step-by-step fragmented approach creates challenges in the AML/CFT framework and makes compliance difficult for businesses that operate in New Zealand.
• Future amendments are suggested to be combined into a single law.
• Reporting authorities must stay aware of all the updates and acquire guidance for implementing robust AML compliance as per the media release.

Key Changes in Australia’s AML/CFT Regulations

• As per the Australian Ministry, the government in Australia likewise modified its AML/CFT framework on the other side of the Tasman.
• Australia has published “the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 (Australian Amendment Bill).”
• The Australian Amendment bill intends to cover “tranche two” entities that include “lawyers, real estate professionals, accountants, and dealers in precious stones and metals” for the first time.
• This action will assist Australia in complying with FATF’s recommendations.
• Australia is currently “one of five out of more than 200 countries” that have not yet implemented regulations on these “gatekeeper professions.”
• New Zealand implemented these regulations in 2018.
• The Australian amendment bill is anticipated to take effect by 2026.