The AML/CFT (Omnibus) Amendment Bill (Bill) was introduced into Parliament yesterday, marking the final element of the legislative package that has overhauled the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act regime following the 2022 Statutory Review. In a press release announcing the Bill’s introduction, Associate Minister of Justice Nicole McKee described the Bill as “the most substantial reform of the Anti-Money Laundering and Countering Financing of Terrorism Act since it was passed in 2009”.

The Bill can be found here. 

Who needs to read it? Why?

All reporting entities should review the changes as they affect a large spectrum of AML/CFT obligations, including core obligations such as customer due diligence (CDD). With increased enforcement and penalties, it is important that reporting entities are compliant and pay close attention to the changes. Further, members of a designated business group (DBG) should pay close attention as the Bill will replace the current DBG framework to align more closely with Financial Action Task Force (FATF) standards.

What does it cover?

Key changes proposed by the Bill include: 

1. Streamlining CDD

The Bill will enable reporting entities to apply simplified CDD, rather than standard CDD, where they have reasonable grounds to assess the money laundering or terrorist financing risk as low. This will give reporting entities more discretion to decide what information must be obtained and verified, based on the risk associated with a particular customer or transaction.

Further, the Bill will expand the scope of customers eligible for simplified CDD. In particular, it will extend simplified CDD to reporting entities required to prepare an annual report under the Companies Act, as well as FMC reporting entities.

The Bill will also modify certain enhanced CDD requirements. For example, enhanced CDD will not need to be conducted where the reporting entity is required to make a suspicious activity report and has reasonable grounds to suspect that conducting enhanced CDD would alert the person that the activity has been identified as suspicious. 

2. Changes to the DBG framework

The Bill will amend the requirements for establishing DBGs to better align with international practice and FATF expectations. It will replace the concept of a DBG with two new frameworks: mandatory reporting groups and voluntary reporting groups. 

A mandatory reporting group will comprise members that are related to each other member and are either reporting entities in New Zealand, or resident in a country supervised or regulated for AML/CFT purposes. Both the mandatory and voluntary frameworks will require reporting entities to assign a lead entity to oversee shared AML/CFT risk assessments and policies.

3. Regulating cryptocurrency providers

The Bill will introduce targeted restrictions on cash payments for virtual asset transfers. This reflects the growing international push to regulate crypto ATMs due to evidence of their use as a vehicle for money laundering. 

As indicated in Minister McKee’s July press release, the Government does not intend to impose a blanket prohibition on crypto ATMs. Instead, the Bill, if enacted, will prohibit the purchase or sale of virtual assets above a prescribed threshold value, which may be set by regulations. Knowingly or recklessly contravening this restriction will be an offence.

Minister McKee’s press release noted that the Ministry of Justice intends to consult on any proposals for regulations to restrict cash payments for remittance services and virtual assets in early 2027.

4. Increased penalties and enforcement powers

If enacted, the Bill will enhance the enforcement powers of the Department of Internal Affairs (DIA) and the Financial Intelligence Unit (FIU), including by establishing an infringement offence regime for minor breaches and creating a new criminal offence for structuring a legal person or legal arrangement to avoid the application of the AML/CFT regime. Maximum penalties for civil liability acts and offences will also increase, including the maximum penalty under the Crimes Act for money laundering doubling from 7 years to 14 years imprisonment. 

The FIU will also gain greater information-gathering powers and the ability to seek rapid freezes on high-risk accounts and transactions. 

5. Integrated targeted financial sanctions regime

The Bill will integrate the United Nations’ targeted financial sanctions regime. It will impose obligations on reporting entities to assess and mitigate sanctions risks, including requiring them to reference non-compliance with specific sanctions in their AML/CFT programme and risk assessment.

Our view

We welcome the broader application of simplified CDD. The changes recognise the need for the AML/CFT regime to be risk-based, targeting customers and circumstances that pose higher ML/TF risks.

However, in our view, the changes to the DBG provisions should be reconsidered, as the unintended consequences may be counterproductive. The Bill appears to assume that a financial group is run centrally and conducts broadly the same business, such that a single AML/CFT programme is appropriate. This will remove the highly valued flexibility that currently allows corporate groups to elect to have one or more DBGs, which may each include all or some only of their controlled entities. Mandatory reporting groups may comprise members with fundamentally different businesses, making it impractical to impose a single AML/CFT programme across the entire group, particularly where some or all of the entities are overseas. 

The changes to the regulation of cryptocurrency providers will require careful review. Cryptocurrency providers and virtual asset providers should monitor developments in this area closely, as it is becoming an area of focus for both the DIA and Ministry of Justice.

What next

Given the proximity of the General Election, the process of the Bill’s passage through Parliament will fall to be decided by the next Government (whichever coalition that may be). However, we expect the Bill is likely to be carried forward and follow the full process during 2027 and possibly into 2028. We expect that will include a Select Committee process when the public and other interested parties can make submission. The Bill would then be finally enacted and receive Royal Assent. 

We suspect the government of the day will be keen for the Bill to have been passed by the time the next FATF Review of New Zealand occurs – currently expected in 2028. 

If you have any questions about the upcoming AML/CFT changes and how they might affect your business, please contact one of our experts.

This article was co-authored by Leanne Chew and Sarah Waller, Solicitors in our Financial Services team.