New regulation exempts court-appointed liquidators from some customer due diligence requirements under the AML/CFT regime.
Court-appointed liquidators have recently been given a limited exemption from some customer due diligence requirements under New Zealand’s AML/CFT regime. This change was part of a wider amendment to the Anti-Money Laundering and Countering Financing of Terrorism (Exemptions) Regulations 2011.
Under the newly inserted regulation 24AA of the 2011 Regulations, as of 9 July 2021, court-appointed liquidators are exempt from the following due diligence requirements under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009:
- standard and enhanced customer due diligence1
- identity and verification of identity requirements in relation to wire transfers2
- ongoing customer due diligence and account monitoring,3 and
- prohibitions if customer due diligence not conducted (e.g. not establishing, or terminating, the “business relationship” with the company in liquidation).4
Section 24AA still requires court-appointed liquidators to comply with the relevant provisions under the 2009 Act for higher risk customers and services, including when:
- conducting an international wire transfer (which would capture distributions to overseas-based creditors), and
- disbursing funds to the “beneficial owner” of the company in liquidation (regardless of whether they are in New Zealand or overseas).
The new regulations also clarify that the customer of the court-appointed liquidator is the company in liquidation.5 This definition ensures that court-appointed liquidators can still submit suspicious activity reports if required.6
The amendments to the 2011 Regulations do not affect other AML/CFT requirements with which insolvency practitioners must comply. RITANZ has published a comprehensive overview document of the relevant aspects of AML compliance for insolvency practitioners, which can be accessed here.
Reasons for the change
We anticipate that court-appointed liquidators will welcome these changes, for the reasons originally identified by the Ministry of Justice:7
- court-appointed liquidators do not have an obvious customer upon which to conduct customer due diligence. The Court appoints a liquidator on the application of a creditor and, if the application is granted, the company is forced into liquidation. The liquidation is ultimately done for the benefit of the creditors of the company, and
- the company may be unwilling or unable to provide information to a court-appointed liquidator which is required to conduct customer due diligence. If the company is the customer, then without an exemption, the liquidator cannot proceed with the liquidation until the customer due diligence requirements are completed. This directly conflicts with the liquidator’s obligations to conduct the court mandated liquidation under section 241(2)(c) of the Companies Act 1993.
Our thanks to Emily James for preparing this Brief Counsel.
1 Sections 14-17, 22(1)(a)-(c), 22(2)-(6) and 22A of the 2009 Act.
2 Sections 27 and 28 of the 2009 Act.
3 Section 31 of the 2009 Act.
4 Section 37 of the 2009 Act.
5 Anti-Money Laundering and Countering Financing of Terrorism (Definitions) Regulations 2011, reg 5B.
6 Ministry of Justice Anti-Money Laundering and Countering Financing of Terrorism Act 2009 – Expiring Regulations and New Regulatory Proposals at 7.
7 Ministry of Justice Regulatory Impact Assessment – AML/CFT Expiring Regulations at 36.