Today, the Ministry of Justice announced that six changes proposed in the current tranche of draft regulations (Draft Regulations) will be removed.
The Ministry’s update can be found on its consultation page for the Draft Regulations here. We have previously discussed the Draft Regulations in more detail.
Who needs to read it? Why?
This update will be relevant to all those following the reforms to the anti-money laundering and countering financing of terrorism (AML/CFT) regime following its Statutory Review that began in July 2021 (which we have previously discussed).
Some entities may already be in the process of updating systems and processes to capture these proposed changes – as described below, some of them were due to take effect on 31 July this year. Where entities have landed in addressing the changes to the AML/CFT regime will need to be modified in light of these latest amendments.
What does it cover?
The changes that will be removed from the Draft Regulations are:
- the specification that “fees for professional services” within the “managing client funds” limb of the “designated non-financial business or profession” (DNFBP) definition means the DNFBP’s own services (the new regulation 7B on page 10 of the Draft Regulations – which was due to come into effect on 31 July 2023);
- the statement that the “engaging in or giving instructions on behalf of a customer to another person” limb of the DNFBP definition includes actions preparing for, or giving instructions relating to, a transaction or transfer even where the activity is not ultimately carried out (the new regulation 7C on page 11 of the Draft Regulations – which was due to come into effect on 1 June 2024);
- the defining of “cheque deposit” for the purpose of the “occasional transaction” definition as a cheque deposit made at a registered bank or non-bank deposit taker (the new regulation 10A on page 11 of the Draft Regulations – which was due to come into effect on 1 June 2024);
- the exemption from the address verification requirement for some customer due diligence (the new regulation 24AJ on page 19 of the Draft Regulations – which was due to come into effect on 1 June 2024);
- the extension of the time period within which a suspicious activity report must be made for law firms (the new regulation 34 on page 28 of the Draft Regulations – which was due to come into effect on 31 July 2023); and
- the extension of the time period within which a prescribed transaction report must be made where there have been issues related to the use of an automated system (the new regulation 35 on page 28 of the Draft Regulations – which was due to come into effect on 31 July 2024).
The Ministry explains the reasoning behind this removal as those changes requiring primary legislation rather than regulations. As a result, it does not appear to reflect a change in policy or intention, but rather a need for another vehicle (albeit one that will likely be enacted at a later date, as the timeframe for legislative change is inherently longer than for regulatory change).
If the Draft Regulations proceed as drafted, they will (minus the proposals removed here) partially come into force on 31 July this year. Officials will be advising the Minister of Justice on the next available legislative vehicle to integrate the proposals that have been removed from the current suite of regulations as amendments to the Act.
If you have any questions in relation to these changes, the Draft Regulations, the Statutory Review process, or the AML/CFT regime more generally, please contact one of our experts.
This article was co-authored by Sam Short (Senior Solicitor) and Elise Plunket (Solicitor) in our Financial Services team.
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