The spin-cycle is over: Government announces AML/CFT supervisory overhaul

The New Zealand Government has announced an upcoming overhaul of the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) supervisory structure, which will include:

• Establishing the Department of Internal Affairs (DIA) as the sole AML/CFT supervisor. Currently, AML/CFT is supervised by the Reserve Bank, the Financial Markets Authority, together with the DIA.
• Introducing an industry levy to fund supervisory activities. Currently, no levies are payable by the industry or reporting entities specifically in respect of AML/CFT.

 

What does this look like overseas?

The Beehive announcement says the changes will help ensure that New Zealand maintains its international reputation. Both parts of the overhaul will bring New Zealand closer to alignment with AML/CFT regulatory approaches seen in other jurisdictions.

For example, Australia currently operates on a single supervisory model, overseen by the Australian Transaction Reports and Analysis Centre (AUSTRAC). AUSTRAC is a specialist agency set up for AML/CFT supervisory purposes.

The introduction of the industry-levy is similar to the supervisory fee charged to reporting entities by the relevant AML/CFT regulator. Given the broadened supervisory role of the DIA following the overhaul, the levy will help ensure that it has the resources it needs to carry out these additional activities.

The Beehive announcement indicates that the levy system will be equitable and reasonable for the sector, without placing undue burden on small businesses. We are pleased to see that this has been considered. The UK addresses this issue by allowing small businesses to apply for a "small business reduction", which will give them a partial refund of their annual fee if their revenue turnover for that year is below a certain threshold.

We hope that small businesses in New Zealand will be able to see a similar accommodation.

 

Our view

We believe that the single supervisor model will help provide some much-needed certainty as to the approach to regulation for all supervised industries. Under the current three-supervisor model, approaches to supervisory engagement and enforcement differ slightly between each of the supervisors.

While the form and presence of money-laundering and terrorism-financing risk differs between each industry, we do agree that a consistent approach brought about by a single regulator will increase efficiency and allow for proper prioritisation of money-laundering and terrorism-financing risks across the board.

The current model siloes priorities within each industry – which means that regulator resources may be used to deal with risks that, when considering all risks as a whole, might be a more low-priority risk.

We look forward to the implementation of these changes and the resulting benefits for all reporting entities.

The Beehive announcement can be found on their website.

If you have any questions on how the incoming changes could impact your business or would like to discuss AML/CFT in more detail, please contact Tom Barnes, Emma Moran, Rachel Taylor, or your usual DLA Piper adviser.