Money

Two significant amendments to the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) regime have passed their third reading and are expected to soon receive Royal Assent:

As discussed in our previous articles (Updates on the AML/CFT reform and Government announces overhaul to the supervisory regime of the AML/CFT system), these Bills form part of the Government's wider overhaul of the AML/CFT regime.  

What are the changes to the AML/CFT regime?

Amendment Bill

The Amendment Bill will introduce several regulatory changes, including:

  • CDD for trusts: Allowing for a risk-based approach to verification of information in relation to proof of address and source of funds or wealth for trusts where risks are adequately mitigated through standard and enhanced customer due diligence (CDD) 

  • PEP requirements: Allowing for a risk-based approach to determining whether a customer or any beneficial owner is a politically exposed person (PEP)

  • Risk assessments: Requiring reporting entities' risk assessments to incorporate risk assessments produced by the DIA and the New Zealand Police Financial Intelligence Unit

  • Further wire transfer requirements: Prohibiting international wire transfers that do not include required originator and beneficiary information

  • Records production updates: Updating record production requirements, including a 20-working day default timeframe where no date is specified

  • Defining "money or value transfer service" (MVTS): This newly introduced definition includes a service that accepts all types of funds or value and that transfers a corresponding sum by electronic or other non-physical means, including through intermediaries.

Supervisor Bill

The Supervisor Bill will introduce significant structural changes to the AML/CFT regime from 1 July 2026:

  • Supervisor consolidation: Replacing the current three-supervisor model (comprising the DIA, the Reserve Bank of New Zealand (RBNZ) and the Financial Markets Authority (FMA)) with the DIA as the sole AML/CFT supervisor, with new rule-making and enforcement powers

  • AML/CFT national strategy: The Minister must adopt and publish a national strategy and regulatory work programme for AML/CFT    

  • New rule-making powers: Providing new powers for the chief executive of the DIA and the Commissioner of Police to make secondary legislation in the form of rules governing matters such as CDD, record keeping and suspicious activity and prescribe transaction reports  

  • New powers: Introducing new DIA investigation powers, including requiring persons to attend meetings and produce documents, and new powers for the DIA to issue censures where it is satisfied on reasonable grounds that a person has engaged in a civil liability act

  • AML/CFT levies: Introducing an annual AML/CFT industry levy to fund the regulatory work programme, with details to be prescribed by regulation.

Our view of the AML/CFT reforms

The Amendment Bill is likely to be a mixed bag for reporting entities, reducing some compliance requirements and introducing new ones.  Reporting entities will, however, be hopeful that the Supervisor Bill will bring greater consistency of interpretation and more timely and reliable guidance across the AML/CFT system.

Specific aspects of the Bills that will be significant for some, or some groups of, reporting entities include:

  • All reporting entities will need to update AML/CFT programmes and policies to enable a more flexible risk-based approach to CDD, PEPs and other aspects of the regime

  • All reporting entities will need to familiarise themselves with the AML/CFT national strategy and work programme, once published, as well as any rules made by the DIA and Commissioner of Police.  Changes to DIA powers will also require updates to regulatory response procedures

  • MVTS providers, or similar business types, will need to carefully consider whether they remain, or become, captured by the new definition, which may involve interpreting undefined terms such as "clearing network"  

  • All reporting entities will need to ensure compliance with updates to international wire transfer, record keeping and other administrative changes and the introduction of levies.

On a practical level, reporting entities currently supervised by the FMA or RBNZ should also take steps now to familiarise themselves with the DIA's supervisory approach and compliance expectations ahead of the 1 July 2026 transition date.  

The reforms will not be the last in this term of Government, with a proposed Omnibus Bill expected to be introduced into the House before the next election.  The Omnibus Bill will include compliance simplification measures such as enabling risk-based approaches to CDD for lower-risk customers as well as making changes to the liability regime, financial sanctions, international funds transfers and virtual currency ATMs.

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 Lily Rose Hosseini (law clerk).