New Zealand government proposes major changes to AML regime

The report's conclusions are being implemented in three stages, of which the first two came into effect on 31 July 2023 and 1 June 2024 respectively. These measures were brought into force by ministerial changes to the regulations, but the final stage required changes to primary legislation, thus prompting the cabinet paper issued on 30 August. The corresponding draft Bill is expected to be introduced to parliament by December 2024 and come into effect on 1 June 2025.

The Bill contains a further 25 measures. Among the most significant is the removal of the mandatory enhanced customer due-diligence (CDD) on certain low-risk trusts. It will no longer be necessary to verify information on the source of funds and of wealth, if the other party is satisfied that verifying this information would not mitigate risks identified from conducting standard CDD.

There will also be an explicit ban on international wire transfers that lack required information identifying the parties to the transaction, in particular, the beneficiary of the transfer.

Another new measure will alter the text in the existing legislation that requires reporting entities to 'have regard' to certain factors when conducting a risk assessment. Instead, reporting entities will be required to 'take into account these factors to a greater extent'. These factors will include government risk assessments.

Three compliance breaches will be explicitly included as civil liability acts under s.78 of the existing act: namely, failing to submit a suspicious activity report (SAR), failing to submit an annual report, and failures in respect of a risk assessment.

Also, the definition of 'trust and company service provider' will be amended to remove the risk of businesses being captured twice under the old definition, both as a financial institution and as a designated non-financial business or profession. The definition of 'beneficial owner' will be amended to explicitly include a person with ultimate ownership or control and to specifically exclude a customer of a customer. Specific record-keeping timeframes within which businesses are required to produce records upon request will also be set, probably stating that the records be produced 'swiftly' rather than 'immediately'.

The obligation on correspondent banks to assess the effectiveness of a respondent bank's money laundering controls will also be eased, requiring these controls only to be 'adequate'.

Sources

• Russell McVeagh
• Buddle Findlay
• Justice Department (cabinet paper, PDF)  
• Financial Action Task Force (July 2024 report on New Zealand, PDF)
• STEP International News Digest, 13 March 2023: New Zealand holds brief consultation on new AML regulations