On 1 March 2023, the Ministry of Justice (MoJ) released a draft set of amendment regulations (Draft Amendment Regulations) under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act). The Draft Amendment Regulations follow from the MoJ's statutory review of the AML/CFT Act that was launched on 1 July 2021. Alongside the Draft Regulations, the MoJ has also published an explanatory consultation document (Consultation Paper). Consultation on the Draft Amendment Regulations closed at 5pm on 14 April 2023.
On 26 June 2023 five AML/CFT amendment regulations (Amendment Regulations) were released by Order in Council. The Amendment Regulations each amend the corresponding AML/CFT regulation and are comprised of the following:
- AML/CFT (Requirements and Compliance) Amendment Regulations 2023
- AML/CFT (Prescribed Transaction Reporting) Amendment Regulations 2023
- AML/CFT (Exemptions) Amendment Regulations 2023
- AML/CFT (Definitions) Amendment Regulations 2023
- AML/CFT (Cross-border Transportation of Cash) Amendment Regulations 2023.
The Amendment Regulations come into force in three stages. A majority of the changes will come into force on 31 July 2023, the second stage of changes come into force on 1 June 2024 and the final stage of changes come into force on 1 June 2025.
Currently the principal AML/CFT Act has not been amended, however the MoJ (as a part of the consultation process on the Draft Amendment Regulations) has determined that 12 proposed changes (initially included in the Draft Amendment Regulations) will need to be made by amendment to the AML/CFT Act. These proposed changes include, among others, additional clarifications to definitions, clarifications to certain customer due diligence requirements and extensions to certain forms of reporting.
Who do these changes impact?
The Amendment Regulations follow from the recommendations included in the Report on the review of the Anti-Money Laundering and Countering-Financing of Terrorism Act 2009 published by the MoJ in November 2022 as part of the statutory review of the AML/CFT Act.
The Amendment Regulations make significant changes to the AML/CFT regime through amendments to the AML/CFT regulations (rather than amendments to the AML/CFT Act).
In particular, the Amendment Regulations impact:
- Current reporting entities under the AML/CFT Act - as their obligations under the AML/CFT Act may have changed/will change
- Businesses who are not currently captured under the AML/CFT Act – as they may now be captured as a reporting entity under the AML/CFT Act.
How is New Zealand's AML/CFT regime changing?
The Amendment Regulations contain a significant number of changes to New Zealand's AML/CFT regime. The Amendment Regulations make, among other things, changes that can be summarised into the following categories:
- Addressing areas of risk: addressing identified regulatory "gaps" in relation to specific risk areas, including high risk customers and cross border transportation of cash
- Clarifying definitions and exemptions: clarifying and/or refining definitions and other terminology that may be out of date or not fit for purpose (for example clarifying the definition of "customer" for a range of scenarios)
- Virtual assets: including a definition of virtual asset service providers (VASPs), capturing virtual asset transactions over $1,000 as occasional transactions (including virtual asset to virtual asset transfers), and prescribing virtual asset transfers as international wire transfers (unless the reporting entity is satisfied all parties to the transfer are in New Zealand)
- Remittance networks: in relation to the suspicious activity reporting and information requirements of money or value transfer services, expanding the information that should be taken into account by remitters involved as both ordering and beneficiary institution in a wire transfer
- Information sharing: expanding the information sharing powers between the AML/CFT supervisors and other government agencies
- Clarifying obligations: clarifying the obligations of reporting entities in relation to customer due diligence (CDD) and record keeping, including a requirement on reporting entities to 'risk rate' customers, clarifying the definition of "beneficial owner" and extending the information required for CDD on legal persons and legal arrangements
- Improving transparency of payment: to ensure compliance with the Financial Action Task Force (FATF) requirements for transparency in relation to wire transfers, which New Zealand is not currently meeting, including obligations to obtain and transmit name and account data for international wire transfers under $1,000, as well as additional requirements to be covered by intermediary and beneficiary institutions in their compliance programmes
- Providing regulatory relief: providing additional exemptions to, among others, certain companies that act as a corporate trustee or nominee companies, Crown entities providing low risk services (as assessed by the Crown entity's AML/CFT supervisor) and registered charities who provide loans of no more than $6,000 (and the borrower is prohibited from repaying the loan in cash).
Proposed amendments to the AML/CFT Act
Twelve proposed changes, initially included in the Draft Amendment Regulations, have not been included in the Amendment Regulations. Following the consultation period on the Draft Amendment Regulations the MoJ determined that these twelve changes need to instead be made by amendment to the AML/CFT Act. There has not yet been an exposure draft of the AML/CFT Act released, however the proposed changes include:
- Requiring border cash reports when stored value instruments (including vouchers or gift cards) are moved in or out of New Zealand
- Exempting a person receiving cash accompanied by a person from having to submit a border cash report
- Clarifying the definition of "professional services" in the designated non-financial business or profession definition
- Clarifying the definition of "engaging in or giving instructions" in the designated non-financial business or profession definition
- Clarifying the definition of an "occasional transaction"
- Allowing operators of money or value transfer services to disclose information relating to suspicious activity reports to their agents or sub-agents as necessary to ensure compliance with other AML/CFT requirements
- Exempting reporting entities from verifying a person's address or registered office when conducting standard CDD in certain circumstances
- Prescribing the process that a reporting entity must follow when conducting enhanced CDD on a trust, including when a reporting entity must verify information relating to source of funds or source of wealth
- Allowing a senior manager of a customer to delegate their authority to act on behalf of the customer to another employee in certain circumstance where the customer is subject to simplified CDD
- Allowing members of a designated business group to share a compliance officer
- Extending the time period a law firm must submit a suspicious activity report from three working days to five working days
- Extending the timer period a person must submit a prescribed transaction report from 10 working days to 20 working days in situations where there have been issues with the reporting entity's automated system.
We recommend all businesses who are either reporting entities under the AML/CFT Act, or have at one point considered whether the AML/CFT Act applies to them, to read the Amendment Regulations and determine which changes may impact their business. These changes are extensive and will impact most, if not all, reporting entities, as well as some businesses who may now be captured by the AML/CFT Act.
If you have any questions about how the Amendment Regulations would impact your business please contact a member of our financial services regulation team.