In the nick of time: Justice minister renews AML/CFT managing intermediaries exemption

In breaking news, the Minister of Justice has approved a two-year renewal of the exemptions under the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) regime for reporting entities with respect to licensed managing intermediaries (LMIs) under Part 5 and specified managing intermediaries (SMIs) under Part 6 of the AML/CFT (Class Exemptions) Notice 2018.

The LMI and SMI exemptions, which were previously set to expire on 31 December 2024, will now remain in place until 31 December 2026 (except for non-bank operators of money or value transfer services). This extension provides additional time for the Ministry of Justice to advance its ongoing review of the AML/CFT regime and its associated ministerial exemptions, which began in July 2021.

These exemptions, which allow reporting entities to rely on customer due diligence completed by their intermediaries (such as registered managed investment schemes or licensed financial advice providers), will continue under materially identical terms. However, the SMI customers exemption will cease to apply to non-bank operators of money or value transfer services from 31 December 2024.

This renewal follows several previous extensions to the LMI and SMI exemptions. Most recently, the Minister approved a 12-month renewal that extended the exemptions with respect to LMI and SMI customers, which were due to expire (alongside the principal exemptions for LMIs and SMIs) on 31 December 2024. At that time, the Ministry had considered the LMI and SMI customer exemptions redundant due to the amended definition of "beneficial owner" in regulation 5AA of the AML/CFT (Definitions) Regulations 2011. However, following industry consultation, it was determined that the exemptions remain necessary despite the updated "beneficial owner" definition.

You can access the empowering amendments to the Class Exemptions Notice here.

Our view

The LMI and SMI exemptions are essential for reducing the compliance burden and minimising duplication for AML/CFT reporting entities operating within a chain of intermediaries, such as fund custodians.

The renewal will undoubtedly provide relief for these entities, particularly given the looming expiry date and the extensive industry advocacy that preceded this decision.

If you have any questions about these exemptions or would like to discuss the ongoing AML/CFT reforms in more detail, please contact your usual DLA Piper adviser.