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The Ministry of Justice (MoJ) is seeking feedback on a review of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (the Act).
Submissions are due by Friday 3 December 2021.
Scope of consultation
The review covers four broad areas.
Institutional arrangements and stewardship
This engages with the design of the Act and looks at whether:
- the purposes of the Act remain appropriate and relevant to New Zealand
- there have been any unintended consequences for New Zealanders (such as, for example, the inability for some people to access banking services)
- the risk-based approach underlying the compliance obligations for reporting entities strikes the right balance between certainty and discretion, and
- a licensing or registration regime should be inserted in the Act.
Scope of the Act
The MoJ has identified several issues bearing on the Act’s scope:
- the fact that the categories of “financial activities” (a) are in some cases unclear and overlap with one another, and (b) do not fully align with the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (FSP Act)
- the key phrase “in the ordinary course of business” is not defined
- difficulties in applying the Act to businesses with multiple types of activities, some of which are not caught by the Act, and
- the territorial jurisdiction of the Act is not specified, which is problematic given the increase in offshore financial service providers servicing New Zealand-based clients1.
In addition the MoJ is considering whether the AML Act’s scope should be expanded to include:
- people who act as secretaries for companies, partners in partnerships, or equivalent positions for other legal persons
- all businesses which provide “virtual asset” (e.g. cryptocurrency) services
- businesses that prepare or process invoices and/or prepare annual accounts and tax statements
- criminal defence lawyers and non-life insurance companies (with very limited obligations), and
- non-profit organisations which are not registered charities and which send or receive money to or from overseas.
Supervision, regulation and enforcement
The MoJ is seeking feedback as to whether the current supervision model (which has the Financial Markets Authority, Reserve Bank of New Zealand, and Department of Internal Affairs taking responsibility different business sectors) is appropriate and promotes consistency, and whether the powers granted to the supervisors are appropriate.
In this context the MoJ is considering whether:
- consultants providing advice to reporting entities on their AML-CFT obligations should themselves be regulated by the Act
- the offences set out in the Act and the penalties for non-compliance remain appropriate, and
- liability should be extended to employees, senior managers, and directors.
This asks whether the core obligations of reporting entities “work” for business and protect New Zealand from harm. These include:
- customer due diligence obligations
- obligations to manage the risk of politically exposed persons
- obligations regarding wire transfers
- prescribed transaction reporting obligations
- obligations when dealing with customers in higher-risk countries, and
- suspicious activity reporting obligations.
The MoJ is also asking whether the obligations should be tailored for particular types of reporting entities, including virtual asset service providers (i.e. providers in the cryptocurrency sector) and high value dealers.
We welcome the opportunity to make the AML/CFT legislation’s requirements more suitable, pragmatic and efficient, but fear the potential for “legislative creep” in any review. The legislation’s requirements are economically burdensome, and it is desirable that its costs are weighed when considering the merits of any changes.
We encourage affected businesses (for instance, non-life insurers) to engage in the consultation process to ensure that any amendments to the Act are fit for purpose.
If you would like more information on what is proposed, or assistance with preparing a submission, please get in touch with one of our contacts.
Anti-Money Laundering and Countering Financing of Terrorism Act 2009
1 It appears that one of the drivers of reviewing the territorial scope of the AML Act is the recent change to the territorial scope of the FSP Act.