As part of its push to reduce red tape, the Government is making changes to the Anti-Money Laundering (AML) regime in a three-stage process. Although businesses are welcoming the changes, some believe that the reforms should focus on reducing friction and cost for reporting entities through greater legislative clarity, rather than structural changes.

A move to a single regulator - a questionable priority

In the last quarter of this year, we are likely to see major reform to the AML regime through the consolidation of regulatory supervision under the Department of Internal Affairs (DIA). While some support this change for efficiency reasons, there is significant concern that regulatory clarity should be delivered before this kind of structural change. Two of the current supervisors have expressed this view, and we tend to agree. Many reporting entities struggle with ambiguous obligations, leading to compliance costs and uncertainty. Shifting to a single regulator will not resolve these fundamental issues.

Industry levy - potential challenges

Another major reform will be the introduction of an industry levy, expected to take effect in 2027. The levy is intended to reflect each reporting entity’s risk profile and ability to pay, with set risk/revenue bands and potential exemptions for smaller entities. However, there are concerns about fairness. Many small firms operate in high-risk areas, which raises the possibility that larger, lower-risk entities could end up subsidising them. Additionally, firms that already work hard to meet compliance obligations may face disproportionate financial pressure compared to less compliant competitors.

Longer term changes to meet international expectations

The Government has signalled its intent to address deficiencies identified in New Zealand’s last Financial Action Task Force (FATF) review. Meeting the FATF’s requirements is essential for preserving New Zealand’s reputation as a trusted destination for global investment.

A key proposed reform is the introduction of a closed trust register, designed to improve transparency and uncover true beneficial ownership. While such a register is a core component of international AML compliance, its implementation will require balancing privacy concerns, ensuring accuracy, and meeting regulatory expectations. This initiative is expected to be introduced in 2027/2028.

Other critical measures - such as licensing virtual asset service providers and remittance providers, and granting Police enhanced asset freezing powers - will only be pursued “as resources become available.” Given the economic and social harms linked to financial crime, the delay in resourcing these reforms is concerning. Further, licensing, while adding compliance costs, also levels the playing field by ensuring that all providers adhere to the same regulatory standards rather than disadvantaging those already investing in compliance.

Immediate technical changes - a brief overview

In the short term, two Bills currently before Parliament propose technical and non-controversial adjustments:

• Statutes Amendment Bill 2024: Includes minor relief measures such as adjustments to address verification requirements and reporting timeframes. This Bill is awaiting report-back by the Select Committee.
• Anti-Money Laundering and Countering Financing of Terrorism Amendment Bill 2024: Aims to clarify obligations, strengthen enforcement, and reduce compliance costs. However, some proposed amendments fall short of providing genuine clarity, particularly regarding beneficial ownership, activities of designated non-financial businesses and professions, and trust due diligence obligations. This Bill is open for submissions until 28 March 2025.

These Bills represent incremental improvements (provided drafting issues are addressed), but it is disappointing that there is no long-term roadmap to tackle deeper challenges, such as clarifying the scope of reporting entity capture and addressing persistent ambiguities in compliance requirements.

If you require further details on the technical changes in the Bills, we are happy to assist.

Next steps

If you wish to make submissions on the Anti-Money Laundering and Countering Financing of Terrorism Amendment Bill 2024, our experts can help. We also provide guidance on AML regime interpretation and compliance challenges, and we continue to advocate for future clarity in the evolving regulatory landscape.