11/11/2022·3 mins to read
AML Act review - changes are coming
This week, the final report (Report) on the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act) was tabled in Parliament.
A key finding is the AML/CFT Act’s regime is not as effective as it could be, and would benefit from substantial improvements. The regime creates unwarranted cost and compliance burdens in certain low-risk areas, while not covering adequately some higher-risk areas.
The Report is 256 hundred pages in length and contains 215 recommendations, too many to detail here. Here are a few highlights of recommendations that may help ease the burden for businesses, if implemented:
Address verification out for standard CDD: Address verification will no longer be required for standard customer due diligence (CDD); it will only be required for enhanced CDD.
Blanket Enhanced-CDD going for trusts: Currently, enhanced CDD is mandatory for all trusts; going forward, it will not be required for low-risk trusts.
Improved regulations: Outdated or confusing exemptions will be modernised or clarified. For example, the exemption for “stored value instruments” (such as gift cards and travel passes) is currently worded in a way that implies a requirement of physical tangibility of the instrument; it will be reworded to make it technology-neutral.
Clarity of capture: Areas of capture will be clarified (eg for designated non-financial businesses and professions, high-value dealers, and virtual asset service providers), as will the AML/CFT Act’s territorial scope and important concepts used in the legislation (such as “ordinary course of business” and “person on whose behalf a transaction is conducted”.)
Conversely, the Report recommends increased regulation of certain sectors, relationships, and transactions. For example, it proposes an AML/CFT-specific licensing framework for high-risk sectors that are not currently licensed under other legislation (such as money remitters, trust and company service providers, and potentially currency exchanges or virtual asset service providers). As a further example, it recommends a thorough risk assessment to identify further measures against real estate-based and trade-based money laundering.
In presentations on the Report, the Ministry has characterised the recommendations into short, medium and long term priorities, which we anticipate will play out as follows:
|Short term||Straightforward regulatory changes||Draft Regulations expected to be issued for public feedback in December 2022, with Regulations to take effect in 6 - 18 months (with those providing relief to take effect earlier than those imposing new burdens)|
|Medium term||Regulatory changes that need more policy development, and operational changes such as new guidance||Discussion document expected to be issued in April/May 2023, with implementation in the next Parliamentary term|
|Long term||Changes to the AML/CFT Act and other legislation, and regulatory changes that follow on from those changes||At least 2024 before an amending Bill would be introduced|
If you are affected by the AML/CFT Act regime, please get in touch. We would be happy to talk to you about the Report’s implications for your business.