Cabinet has approved the final structure of the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) levy. From 1 July 2027, the levy will be payable by reporting entities in specified sectors.
The industry levy is intended to support the Government’s AML/CFT National Strategy 2026-2030 and accompanying work programme, which were announced in February (as discussed here), by partly funding it alongside Crown funding. The new levy aims to fund improved intelligence sharing, enhanced the Department of Internal Affairs’ (DIA) supervision, and better consultation with sector participants through better resourcing of the New Zealand Police Financial Intelligence Unit (FIU).
More information on the levy, how it fits into the AML/CFT National Strategy, and the wider transition to the single supervisor model is available here.
Who needs to read it? Why?
Ahead of levy collecting starting from 1 July 2027, reporting entities need to know the levy band applicable to them and factor this additional cost into their financial planning. The levy will only be payable by reporting entities in sectors specified by Government.
What does it cover?
Following consultation with the industry, and as was proposed in the levy consultation, Cabinet has agreed that levy costs will be paid by three groups of reporting entities:
1. Banks and deposit takers will contribute 85%
In response to submissions from smaller banks seeking a differentiated levy rate, Cabinet has agreed to a two-tiered levy rate for banks and deposit takers that reflects the wide variation in asset sizes across the sector. The levy will be apportioned as follows:
- 80% of the levy will be allocated to banks and deposit takers with over $101 billion of reported assets; and
- 5% of the levy will be allocated to banks and deposit takers with between $2 billion to $101 billion of reported assets.
2. Casinos, TAB and Entain will contribute 9%
3. Non-Bank Financial Institution and Designated Non-Financial Business and Professions will contribute the remaining 6%.
These three sectors have been assessed as high-risk or medium-high risk by the 2024 National Risk Assessment and the Sector Risk Assessments, and it is on that basis that they have been selected to be subject to the levy. Other reporting entities are not required to pay the levy.
Introduction of the levy coincides with implementation of the National Strategy work programme, which agencies have begun implementing from 1 July 2026, incurring costs and creating a deficit in the interim. The Ministry of Justice anticipates that from 1 July 2027, the levy will recover $27.33 million per annum from the three reporting entity groups identified above.
The levy will be reviewed every three years, and the Ministry of Justice has expressed its willingness to engage with reporting entities to evaluate performance of the hybrid funding model. Agencies will review levy expenditure and revenue annually, and publish an annual report as required under the AML/CFT Act. The Ministry of Justice will consult levy payers on any proposed changes.
Regulations are now being developed for Cabinet approval and are expected to be published by September 2026. Levy decisions, including the Cabinet paper, Cost Recovery Impact Statement, Summary of Submissions, will be proactively released once levy regulations are published.
Our view
Cabinet has now settled on an approach that will attract a range of views across the industry, and will be controversial for some, arguing that it is a fundamental principle of a levy compared to a tax that the burden is proportional to the benefit received from the relevant service or activity. They argue that the principal benefit is to New Zealand as a whole, in that the detection and prevention of crime is beneficial to all, not only those reporting entities whose business have the higher risk of being misused by criminal elements.
The decision to limit the levy to medium-high and high-risk sectors means that a significant number of reporting entities will not contribute to the cost of the AML/CFT system at all. Those within scope may question whether their sector classification is appropriate, given the financial consequences of that categorisation. The decision to apportion the greatest share of the levy burden to banks and deposit takers (85%) reflects the Government’s assessment as the highest-risk sector and their relative capacity to absorb costs.
We do welcome the Government’s commitment to a three-yearly review of the levy and its stated willingness to engage with reporting entities on the levy’s performance. With regulations still to be finalised, there remains an opportunity for further engagement before obligations are locked in. We encourage all reporting entities to monitor developments closely and to engage with consultation processes as they arise.
What next?
Reporting entities need to be aware of the levy that will be payable by them. They should also monitor the upcoming levy regulations and be familiar with the detail of the levy decisions once published.
We recommend that reporting entities continue to provide feedback to the Ministry of Justice when consultation opportunities arise.
If you have any questions in relation to the levy or are considering how these changes (if implemented) may affect your firm or business, please contact one of our experts.
This article was co-authored by Leanne Chew (Solicitor), and Sarah Waller (Law Clerk) in our Financial Services team.
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