Ministry of Justice releases consultation on draft AML/CFT regulations
9 March 2023
On 1 March 2023 the Ministry of Justice (MoJ) released a draft set of regulations (Draft Regulations) under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act). The new 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).
The MoJ is seeking submissions by 5pm on 14 April 2023. If you have any questions about the Draft Regulations, or would like assistance with preparing a submission, please contact a member of our financial services regulation team.
Who do these changes impact?
The Draft 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 Draft Regulations propose significant changes through amendments to AML/CFT regulations rather than amendments to the principal AML/CFT Act.
In particular, the Draft Regulations (and Consultation Paper) impact on:
- Current reporting entities under the AML/CFT Act - as their obligations under the AML/CFT Act may 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 law changing?
The Draft Regulations contain a significant number of proposed changes to New Zealand's AML/CFT law. The Consultation Paper is split into eight parts – one for each category of proposed change. These categories are:
- 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- Clarifying definitions and exemptions: clarifying and/or refining definitions and other terminology that may be out of date or not fit-for-purpose
- 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 otherwise)
- Remittance networks: in relation to the suspicious activity reporting 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, and clarifying the definition of 'beneficial owner'
- 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 institutions in their compliance programmes
- Providing regulatory relief: providing additional exemptions to, among others, certain companies that act as a trustee or nominee, crown entities and registered charities who provide loans of no more than $6,000. All reporting entities are also exempt from conducting address verifications other than when enhanced CDD is required.
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 Draft Regulations and Consultation Paper and determine which changes may impact their business. The changes proposed 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.
The MoJ has asked for submissions to be provided by 5pm on 14 April 2023. This is a short turnaround for submissions, and we again recommend businesses to urgently consider the Draft Regulations and Consultation Paper and whether they wish to provide a submission to the MoJ.
The Draft Regulations, as currently drafted, would partially come into force on 31 July 2023, with the rest of the provisions coming into force on 1 June 2024.
If you have any questions about how the Draft Regulations would impact your business, or would like assistance with preparing a submission, please contact a member of our financial services regulation team.