Proactive Release – Cabinet Papers on proposed AML reform
The Ministry of Justice has proactively released a bundle of Cabinet papers outlining the upcoming reforms to New Zealand's Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) regime. The reforms are progressing, with key developments including:
- announcement of an AML/CFT supervisory system overhaul, including introducing an industry levy and establishing the Department of Internal Affairs as the sole supervisor (our summary of this can be found here);
- introduction of the AML/CFT Amendment Bill (as part of the Regulatory Services Amendment Bill (RSAB)) for which we set out some key changes here, and the Statutory Amendment Bill (SAB). The SAB seeks to alleviate certain customer due diligence obligations, such as verifying address information for all customers. It also extends reporting timeframes for suspicious activity reports for lawyers and for prescribed transactions.
What's in the papers?
The documents introduce the Associate Minister's three workstreams to deliver on the wider reforms (including what has already been progressed above), being:
Workstream 1, which aims to deliver immediate relief to New Zealand businesses from compliance burdens via RSAB and the SAB.
The Cabinet papers noted that the SAB is expected to be enacted by 28 April 2025. Submissions to the Select Committee for the SAB closed on 4 December 2024 with its report due 17 April 2025 as of the date of this publication.
The RSAB had its first reading last week and was met with support. Submissions to the select committee are now open to the public until 28 March 2025.
Workstream 2, which relates to the overhaul of the supervisory and funding system (per point 1 above). A Bill is expected to be introduced to effect this change in March 2025 according to the Cabinet papers, with approval for levy regulations sought by May 2025.
Things that the Bill will propose to do include:
- allowing the levy to be differentiated according to sub-groupings of reporting entities; and
- requiring consultation with reporting entities and other stakeholders when setting the levy rates.
Workstream 3, which introduces some anticipated changes to regulatory settings in light of the Financial Action Task Force's 2021 evaluation of New Zealand's AML/CFT regime. The changes include:
- establishment of a closed trust register to help businesses gather beneficial owner information while reducing costs and duplication associated with customer due diligence processes;
- reviewing the designated business group (DBG) process, by shifting the compliance expectation from individual businesses to groups of businesses;
- reforming offence and penalty settings, with the goal of ensuring offences and penalties are proportionate and dissuasive;
- bringing in proliferation financing and targeted financial sanctions; and
- improving customer due diligence settings, so that requirements are focused more closely on risk.
It is expected that a bill effecting the changes in Workstream 3 will be introduced by April 2026. Further changes under Workstream 3 will be introduced subject to resources being available.
Our view
We welcome the greater clarity on the anticipated timeline and further details of the reform package as a whole. The relief measures under Workstream 1 are expected to be well received by the industry, while the single-supervisor model under Workstream 2 should provide much-needed regulatory certainty for affected businesses. We also look forward to further details on the implementation of Workstream 3, particularly in respect of the closed trust register and how disclosure will be enforced.
If you have any questions relating to AML/CFT, or would like assistance with a submission regarding the RSAB, please contact Tom Barnes, Rachel Taylor, or Maggie Chen.
