Who Needs to Abide By AML/CFT Regulations in New Zealand?

Posted by Kelvin Chandran on 3/20/19, 11:58 AM
Kelvin Chandran
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AML/CFT New Zealand

Anti-money laundering (AML) regulations have played an important role in shaping the continued development of the international financial system in past decades. In recent years, the types of businesses that need to comply with these regulations have been expanding as governments aim to better prevent financial crimes.

In this post, we take an in-depth look at current and upcoming AML policies in New Zealand. This includes initial regulations, amendments added over the years, and an explanation of which organisations must comply with these policies.

New Zealand AML/CFT Regulations and Amendments

On a global scale, there are many common components to regulatory compliance surrounding AML. However, many variations also exist. Therefore, for this article, we’ll examine policies that apply specifically to New Zealand. With this being said, New Zealand policies don’t reflect those of other jurisdictions around the globe. If you’re operating a business in another jurisdiction, you should be knowledgeable on regulations that apply to that specific jurisdiction.

The original legislation that established modern regulations in New Zealand is titled the “Anti-Money Laundering and Countering Financing of Terrorism Act 2009”. This legislation consists of four main parts and subsections on specific legal obligations, compliance guidelines, and enforcement/penalties for violations surrounding AML/CFT. Since this legislation was first introduced, two new major amendments were adopted (2013 and 2017).

First, current policies surrounding AML and CFT Combating the Financing of Terrorism (CFT) in New Zealand generally fall under two phases. “Phase 1” businesses include banks, casinos, and a range of financial service providers that have had to comply with the regulations since 2013. Second, the list of organisations expanded after the passage of the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Amendment Act 2017. Organisations later added to the list of are referred to as “Phase 2” businesses.

So why are these changes taking place? According to the Ministry of Justice website, “Each year about $1.35 billion from the proceeds of fraud and illegal drugs is laundered through everyday New Zealand businesses. These law changes - put in place practical measures to protect businesses and make it harder for criminals to profit from and fund illegal activity. They’ll also safeguard and help New Zealand live up to our reputation as being one of the least corrupt countries and a good place to do business.”

Which Organisations Need to Comply in 2019?

In addition to the above-mentioned businesses listed in Phase 1, Phase 2 includes a variety of other organisational categories. For some, changes from the 2017 legislation have already taken effect in 2018 or early 2019. These include lawyers, conveyancers, businesses that provide trust and company services, accountants, and real estate agents. For companies in sports and racing betting as well as businesses trading high value goods, the deadline is set for August 1, 2019.

Just because your organisation operates in one of these specific sectors doesn’t necessarily mean you have to set up AML or CFT compliance standards. Thankfully, the qualifications to determine your organisation’s status are relatively well-defined. For example, let’s look at the real estate agent category, which took effect on January 1, 2019.

It states, “You’ll need to comply with the Act if you:

  • Represent a client who’s selling or buying real estate
  • Accept a deposit in cash of $10,000 or more from someone who’s buying real estate.”

This page outlines everything you’ll need to do initially to meet compliance standards and well as what your organisation needs to do on an ongoing basis to ensure continued compliance. Similarly, The Ministry of Justice website includes individual pages that provide specific compliance details for all impacted organisational categories. This gives more clarity to understanding the requirements of the legal compliance processes and makes it easier to determine which policies do and don’t apply to your organisation.

It’s also important to note that the Ministry of Justice offers organisations the possibility of applying for an exemption. For example, if a business faces low money laundering risks, it may not be required to meet some or all of the usual requirements. Before starting the exemption application process, be sure to read this document thoroughly. In some instances, your organisation might already be exempt.

The Role of Individuals and Organisations in Compliance

For individuals (i.e. customers) of businesses, regulatory changes could mean the introduction of a number of new processes. For instance, many organisations may now be required to utilise solutions like KYC checks. For legitimate customers, this might lead to longer approval wait times or the need to provide more data to organisations.

Although customers must comply with these requests in order to access various services, it is ultimately the responsibility of organisations to prevent crimes like terrorist financing, money laundering, and identity fraud. We explain all of this in much more detail in our complete guide to AML for organisations.

Topics: AML, CFT, New Zealand

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