The Government is chipping away at technical improvements to the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (Act). 

This article covers changes included in the Statutes Amendment Bill (Statutes Bill) that was introduced into Parliament on 23 September 2024. It also covers 25 further changes approved by Cabinet in mid-2024, as recorded in a Cabinet Paper released on 20 August 2024. These 25 changes will be effected by a further Bill, which will be introduced later this year and named the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Amendment Bill (Second Bill). 

These changes are part of a package of amendments to the Act. Several substantive changes to the Act will be made via a Bill scheduled for 2026. The changes under the Statutes Bill and pending Second Bill are minor or technical in nature, so that they can be progressed ahead of those more substantive changes. The changes arise from the following two reviews of New Zealand’s AML/CFT regime: 

• the Financial Action Task Force’s 2019-2021 assessment of New Zealand (see here: New Zealand’s measures to combat money laundering and terrorists financing); and 
• a statutory review conducted by the New Zealand Government in 2022 (see here: Te Tāhū o te Ture, Ministry of Justice, Report on the review of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009, pursuant to section 156A(3) of the said Act, July 2022). 

We set out below an overview of the key changes in the Statutes Bill and pending Second Bill and the key dates to be aware of moving forward. 

Statutes Bill 

The amendments to the Act proposed in the Statutes Bill will:

• exclude cheque deposits made at a registered bank or non-bank deposit taker from the definition of “occasional transaction”; 
• allow reporting entities to take a risk-based approach to address verification (but will not remove address verification altogether for lower risk customers, as many had hoped);
• extend the suspicious activity reporting timeframe from 3 working days to 5 working days for law firms (because law firms need more time to identify and exclude privileged communications); and
• extend the prescribed transaction reporting timeframe from 10 working days to 20 working days.

Second Bill

The amendments approved by Cabinet for inclusion in the proposed Second Bill are wide-ranging. We group them as follows:

Changes to customer due diligence (CDD) requirements 

Enhanced CDD for trusts and other vehicles	Current position: Enhanced CDD is mandatory for all customers that are trusts or other vehicles for holding personal assets, irrespective of risk level.   Amendment: Reporting entities will not be required to verify information relating to the source of funds or source of wealth of a trust or similar vehicle as part of enhanced CDD, if the reporting entity is satisfied that standard CDD is sufficient to identify and address any relevant risks.
Factors to consider when conducting risk assessments	Current position: Section 58(2) of the Act requires businesses to “have regard to” the list of factors set out in that section when conducting a CDD risk assessment, including (in particular) any applicable guidance material produced by the AML/CFT supervisors (Supervisors) or the Commissioner relating to risk assessments.  Amendment: Amend section 58(2) to create a more concrete obligation for businesses to take the listed factors into account.
Application of prohibitions if CDD is not conducted	Current position: Section 37 of the Act restricts a reporting entity from establishing a business relationship with, or otherwise carrying out a transaction for, a customer if the reporting entity “is unable to” conduct CDD in accordance with the Act. The Government has cited concern that this may be interpreted to mean that if a reporting entity can conduct CDD, but chooses not to, the prohibitions do not apply.  Amendment: Amend section 37 to replace “is unable to” with “does not”, to ensure the prohibitions apply in all appropriate instances where CDD is not conducted.
Requirements for identifying and assessing politically exposed persons	Current position: The Act requires reporting entities to take “reasonable steps” to assess whether a customer is a politically exposed person. This phrasing has led to confusion regarding the specific actions required and the timing for those actions. Amendment: Amend the current “reasonable steps” requirement in section 26 to require businesses to have fit-for-purpose risk management systems in place to identify politically exposed persons.
Requirements for compliance officers	Current position: Section 56(4) of the Act requires a compliance officer for a reporting entity to report to a senior manager. This arrangement does not align with best practice and may result in the compliance officer lacking the necessary seniority to effectively oversee or influence the entity's AML/CFT policies and procedures. Amendment: Amend the Act to require compliance officers to themselves be senior managers or to report to senior managers.
	Current position: The Act does not explicitly provide that compliance officers need to be natural persons. This has led to some businesses appointing other companies as their compliance officers.  Amendment: Amend the Act to explicitly provide that compliance officers must be natural persons.

Changes to enforcement regime 

Supervisors’ standing to recover penalties and costs awarded in proceedings	Current position: The Department of Internal Affairs (DIA) cannot apply to the court to liquidate a business to recover penalties and costs incurred in proceedings taken under the Act, unlike the two other Supervisors. Amendment:  Amend section 132(2) to clarify that any Supervisor can recover penalties and costs in proceedings under the Act.
Application of pecuniary penalties to supervisors’ costs in bringing proceedings	Current position: The Supervisors cannot apply to a court to have pecuniary penalties cover their actual costs in bringing proceedings.  Amendment:  Amend the Act to:  permit the recovery of penalties, similarly to the approach in other legislation; and provide that if the court orders a pecuniary penalty, the court also orders that the penalty be applied first to pay the Supervisor’s actual cost in bringing the proceedings.
Formal warnings and censure	Current position: If a person breaches the Act, the Supervisors can issue a formal warning. However, naming this a “formal warning” may not carry the intended weight. Amendment: Change the terminology from “formal warning” to “censure”, to increase the deterrent effect.
Additional civil liability acts	Current position: Failure to submit a suspicious activity report and failures in respect of risk assessments are not civil liability acts. It is unclear whether failing to submit an annual report is a civil liability act.  Amendment: Amend section 79 of the Act to explicitly include the three compliance breaches noted above as civil liability acts.
Information sharing	Current position: The Act contains limited provisions that explicitly allow the DIA to share information internally for law enforcement purposes. Amendment: Amend the Act to allow the DIA to share information internally for law enforcement purposes in the same way that it shares information with other Government agencies.

Changes to definitions and interpretation matters 

DNFPBs and financial institutions	Current position: Section 6(4) of the Act states that the Act applies: (a) to a financial institution “only to the extent that” it carries out financial institution activities; and (b) to a designated non-financial business or profession (DNFBP) “only to the extent that” it carries out DNFBP activities. This has caused an issue where an entity may be both a financial institution and DNFBP.  Amendment: Remove the term “only to the extent that” from section 6(4), clarifying that the Act applies to both these capacities and their activities equally.
Definition of “trust and company service provider” in the Act	Current position: The definition of “trust and company service provider” is worded in such a way that some businesses are technically captured as both financial institutions and DNFBPs. This results in confusion and the unnecessary duplication of obligations under the Act.  Amendment: Amend the relevant definition to prevent businesses being captured as both financial institutions and DNFBPs.
Definition of “life insurer”	Current position: “Life insurer” is not defined in the Act.     Amendment: A definition (aligned to the definition in the Insurance (Prudential Supervision) Act 2010) will be inserted into the Act.
Definition of “money or value transfer service”	Current position: Although the term “money or value transfer service” is widely used in regulations and guidance, it is not defined in the Act.  Amendment: A definition will be inserted into the Act.
Definition of “beneficial owner”	Current position: Recently, the Anti-Money Laundering and Countering Financing of Terrorism (Definitions) Amendment Regulations (No 2) 2023 amended the definition of “beneficial owner” to include persons with ultimate ownership or control of an entity and to exclude a customer of a customer.  Amendment: Amend the definition of “beneficial owner” in section 5 of the Act to make it consistent with the definition in the above Regulations.
Clarification of “customer” terminology	Current position: Various sections of the Act use the term “customer” in places where this does not align with that term’s definition in section 5 of the Act.  Amendment: Amend the relevant sections to replace “customer” with “person”.

Information requirements for international wire transfers	Current position: The Act expressly prohibits wire transfers where CDD has not been done and/or required information about the originator is missing. However, the Act does not expressly prohibit international wire transfers that do not have the required beneficiary information.  Amendment: Expressly prohibit international wire transfers that are not accompanied by the beneficiary information required by the Act. While mainly clarificatory, this change is significant due to the extensive information requirements for international wire transfers.
Enquiries on behalf of overseas counterparts	Current position: The Act does not expressly allow the Supervisors to conduct enquiries on behalf of foreign counterparts. Amendment: Amend the Act to clarify that the Supervisors are empowered to conduct enquiries on behalf of overseas counterparts.
Cash movement and reporting	Current position: There are various technical issues with requirements relating to the cross-border movement of cash and value, and its reporting. Amendments: Amendments will be made to address loopholes and improve efficiency.

Timeframe

The Statutes Bill is awaiting its first reading and referral to Select Committee. This was at number 6 on the Parliamentary Order Paper for 26 September 2024 (but may change in the Order Paper for 15 October 2024). 

The Cabinet Paper indicates that the Second Bill will be introduced in November 2024 (or December 2024 at the latest). 

Next steps

While the proposed changes are still very much in the initial stages, they are set to bring about some notable changes for reporting entities - particularly in relation to trusts, risk assessments, and enforcement.  Reporting entities should start preparing now for submissions once the relevant Bills progress to Select Committee stage.

Please contact one of our experts if you need more information about these specific developments, or for general assistance with AML/CFT compliance.

Special thanks to Isabel van Tuinen for her assistance in writing this article.