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  • Improved regulations: Outdated or confusing exemptions will be modernised or clarified.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:

Priority Type Timing
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.


Related Articles