A suite of Cabinet papers, minutes, and associated documents was proactively released last week in relation to the ongoing anti-money laundering and countering financing of terrorism (AML/CFT) reforms. These reflect decisions made late last year, and broadly describe a three-part programme of reform in line with the Associate Justice Minister’s statement from October (which we discussed at the time).

Who needs to read it? Why?

The proposed reforms go not only to common pain points in AML/CFT regulation but also to the structure of the regime more widely. These materials will be of interest to all reporting entities.

What does it cover?

The release pack of Cabinet documents is extensive, and we will not cover it exhaustively here. However, the documents set out in more detail the three workstreams that the Associate Minister’s earlier statement sketched out, which is a useful indication of the intended steps going forward.

Workstream 1 is intended to “provide business with immediate relief from compliance burdens and reduce compliance costs”. This will be in the form of the Regulatory Services (Justice) Amendment Bill (RSJAB) and the Statutes Amendment Bill (SAB) (each of which we have previously discussed), which between them will (among other things):

• relax the current requirement for enhanced customer due diligence (CDD) in relation to low-risk trusts, to make accessing and changing financial services easier for most trusts and reduce the burden for providers;
• remove the obligation to verify the address of most customers, to reduce obligations on business as well as improve financial inclusion and help vulnerable persons who may have difficulty in evidencing this; and
• extend the reporting timeframes for prescribed transaction reports and (for lawyers) suspicious activity reports.

The papers note that the SAB is expected to be enacted on 28 April 2025, while no such date is given for the RSJAB.

Workstream 2 will bring the structural changes to the regime that have previously been announced (and which we have previously discussed) – specifically, the consolidation of the regime down to a single supervisor and the introduction of a levy funding model. This is intended to reduce duplication of expenditure, improve decision-making and the provision of advice and support for business, and provide an alternative to Crown funding.

The Cabinet materials state that a Bill covering Workstream 2 is intended to be introduced by March 2025.

Workstream 3 is then intended to bring enhancements to regulatory settings and mitigate the risk of grey-listing by the Financial Action Task Force, drawing from the 2021-2022 Statutory Review of the regime (which we explored in detail). Changes identified in the Cabinet materials include:

• placing compliance requirements for business groups on the group as a whole rather than individual businesses;
• incorporating proliferation financing and targeted financial sanctions into the regime, so businesses have clear obligations and are supported;
• developing a closed trust (i.e. beneficial ownership) register, to reduce compliance costs and duplication of CDD and assist law enforcement;
• reforming settings for offences and penalties, to ensure they are proportionate and dissuasive;
• improving and simplifying CDD settings to reduce duplication and focus the requirements on risk; and
• (as resources become available) expanding the range of exemptions, designing a licensing system for high-risk sectors, and expanding the powers available to law enforcement and intelligence agencies.

A Bill relating to Workstream 3 is, according to the Cabinet materials, intended to be introduced by April 2026, following Cabinet decisions sought in April 2025.

Our view

As we have previously discussed, we are broadly supportive of the Workstream 1 regulatory changes (especially around address verification and trust CDD) and their being prioritised. These have been issues faced by reporting entities since the regime began, and their relaxation will certainly be positively received.

The Workstream 2 structural changes require more detail before they can be assessed to any real degree. For instance, the questions we raised around the appropriateness of the governance arrangements of the Department of Internal Affairs for a consolidated supervisor remain. Similarly, although the Associate Minister has “made it clear to officials that the introduction of any levy should not place an undue financial burden on New Zealand’s low-risk small businesses”, the actual weight and placement of the levy obligation will need to be defined, and we would expect it to be demonstrated that they are fair and reasonable.

The Workstream 3 proposals will also no doubt be fleshed out in more detail as time progresses, although we certainly support the goal of mitigating the risk of grey-listing, with all the consequences that would bring (as described in the Statutory Review).

What next?

As mentioned above, the Cabinet materials envisage a number of Bills and associated Cabinet decisions later this year and into next, although ultimately that will depend on wider Parliamentary timetables.

If you have any questions in relation to these Cabinet materials, the ongoing AML/CFT reforms more generally, or the wider AML/CFT regime, please contact one of our experts.

This article was co-authored by Sam Short (Senior Solicitor) and Edward Kruger (Summer Clerk) in our Financial Services team.