Associate Justice Minister Nicole McKee has just introduced the Anti-Money Laundering and Countering Financing of Terrorism (Omnibus) Amendment Bill (Bill) into Parliament, describing the Bill as the most substantial AML/CFT reform since the Act was passed in 2009.

The Minister’s aim is to better target actual risk, which the Bill would do by significantly widening access to simplified customer due diligence (CDD) and watering down enhanced CDD requirements.

The key question is whether these changes reduce compliance burden, or simply shift it by requiring more case-by-case judgement? That question will depend heavily on regulator guidance and how easily reporting entities can operationalise the proposed new risk-based options.

What are the proposed reforms?

Key changes proposed in the Bill include:

• Greater flexibility in CDD: Simplified CDD would be available for all New Zealand large and public entity companies, all FMC reporting entities, and any customer relationship assessed by a reporting entity as low risk. Reporting entities would determine the information required for many low-risk customers, with standard CDD required if eligibility for simplified CDD ceases.

• Changed enhanced CDD settings: Trusts would no longer automatically trigger enhanced CDD, high-risk country triggers would be narrowed to FATF jurisdictions subject to a call for action, and source of wealth or source of funds checks would not be mandatory in enhanced CDD.

• New UN sanctions compliance framework: UN-targeted financial sanctions compliance would be incorporated into the AML/CFT regime, requiring reporting entities to assess and mitigate sanctions risk. The Russia sanctions regime would remain separate.

• Replacement of designated business groups: Designated business groups would be replaced by mandatory and voluntary reporting groups, requiring related corporate entities to have group-wide AML/CFT compliance arrangements.

• Expanded intelligence and enforcement powers: The Financial Intelligence Unit would gain broader information-gathering, production order and freezing order powers, with wider information-sharing between reporting entities, supervisors, Police and intelligence agencies.

• New cash and virtual asset controls: Thresholds and restrictions would apply to specified cash and virtual asset transactions, including some transfers outside New Zealand.

• Stronger compliance and penalty regime: The Bill would introduce infringement offences, increase civil and criminal penalties, extend limitation periods, and strengthen money laundering penalties under the Crimes Act 1961.

Our view

Reporting entities and customers will welcome the reduced compliance burden where lower risk justifies it. However, risk-based reforms can create hidden complexity. If the Bill proceeds, reporting entities will need robust policies, controls and records to justify judgement-based decisions, and smaller entities may find this difficult to operationalise.

The reforms could also come online just as New Zealand is due for its next Financial Action Task Force mutual evaluation. If CDD requirements are diluted too far, or become harder to assess for effectiveness, New Zealand may face greater scrutiny, with potential consequences for how offshore counterparties assess New Zealand businesses against international AML standards.

What happens next?

The Bill was introduced into Parliament on 1 September 2026. If it is not passed this term, it will lapse unless picked up by the post-election Government. The Council of Financial Regulators expects its passage in the second half of 2027. If enacted, the Bill would come into force one year after Royal assent, which will be a tight implementation timeframe given the need for regulator guidance.