About the AML/CFT Act
The AML/CFT Act
Overview
The Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Bill received royal assent on 16 October 2009. Read the Cabinet papers and the regulatory impact statement provided to Ministers during the development of the law here.
The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 can be found on the New Zealand Legislation website.
The new law seeks to detect and deter money laundering and terrorism financing, to contribute to public confidence in New Zealand’s financial system, and to bring New Zealand into line with the international standards for AML/CFT frameworks, as set out by the recommendations of the Financial Action Task Force.
The Act provides:
- a set of requirements for reporting entities including customer due diligence, account monitoring and suspicious transaction reporting
- a risk-based framework to detect and deter money laundering and terrorist financing
- a regime for supervision, monitoring and enforcement of AML/CFT obligations involving three supervisors
- an enforcement regime, including new civil and criminal offences.
Parts of the law that establish definitions, provide for the supervisory regime and govern the cross border transportation of cash are already in force. Remaining provisions will come into force on 30 June 2013.
Institutional arrangements
The three supervisors of the AML/CFT regime are:
- The Reserve Bank will supervise banks, life insurers and non-bank deposit takers
- The Financial Markets Authority will be the supervisor for issuers of securities, trustee companies, futures dealers, collective investment schemes, brokers and financial advisers. Note that the Financial Markets Authority took over the AML/CFT functions of its predecessor the Securities Commission of New Zealand on 1 May 2011
- The Department of Internal Affairs will supervise casinos, non-deposit taking lenders, money changers and other reporting entities that are not covered by the Reserve Bank or Financial Markets Authority.
In addition the Ministry of Justice is responsible for policy development and the administration of the legislation. The Ministry will also handle all matters related to exemptions from the Act.
The Financial Intelligence Unit of the New Zealand Police receives suspicious transaction reports and issues guidance on money laundering and terrorism typologies and how to meet suspicious transaction reporting obligations under the Act.
The New Zealand Customs service receives cross border cash reports made under the AML/CFT Act and enforces the cross border cash reporting regime which is contained in the AML/CFT Act.
The AML/CFT National Coordination Committee is chaired by the Ministry of Justice and is comprised of a representative of each AML/CFT supervisor, the Financial Intelligence Unit of the New Zealand Police, and the New Zealand Customs Service. Other agencies are invited from time to time where they have an interest in AML/CFT matters.
The role of the National Co-ordination Committee is to ensure that the necessary connections between the AML/CFT supervisors, the Commissioner (of Police), and other agencies are made in order to ensure the consistent, effective, and efficient operation of the AML/CFT regulatory system.
Information for reporting entities
Important!
The information provided on this website does not constitute legal advice. Readers are advised to consult the statute and regulations before undertaking any action in reliance on the contents of this webpage.
AM I A REPORTING ENTITY?
The AML/CFT Act applies to financial institutions, casinos, certain financial advisers and trust and company service providers. Financial institutions and casinos are reporting entities under section 5 of the Act, certain financial advisers and trust and company service providers have been included as reporting entities by regulation.
Financial institutions
If in the ordinary course of your business you carry out one or more of the financial activities listed in the definition of a financial institution, you are required to comply with the Act in relation to those activities. Examples of financial activities include (but are not limited to):
- accepting deposits or other repayable funds from the public
- making a loan to or for a customer
- issuing a debit or credit card
- managing the means of payment
- supplying goods through a finance lease (other than for consumer products)
- providing remittance services which transfer money or property
- issuing or accepting liability under life insurance policies
- issuing or selling securities and derivatives
- safekeeping or administering cash or liquid securities on behalf of other persons
- exchanging foreign currency.
Please refer to section 5 of the AML/CFT Act for the complete definition of financial institution.
Casinos
Section 5 of the AML/CFT Act defines a casino as the holder of a casino operator’s license under the Gambling Act 2003.
Financial advisers
Some financial advisers (and firms that provide financial advice) may be financial institutions under the Act. They are required to comply with the Act like any other financial institution.
Other financial advisers may not be financial institutions, but will be captured by the regulations if they are individuals who are required to be authorised financial advisers under the Financial Advisers Act 2008 or if they are persons who provide financial adviser services in respect of category 1 products (including to wholesale clients).
Financial advisers who are not financial institutions, but who are reporting entities because of the regulations are only required to comply with the Act so far as they arrange for the provision of relevant services by a reporting entity to a customer.
Please refer to the Anti-Money Laundering and Countering Financing of Terrorism (Definitions) Regulations 2011 for more detail.
Trust and company service providers
Regulations define trust and company service providers as those who, as the only or principal part of their business, carry out 1 or more of the following activities:
- acting as a formation agent of legal persons or arrangements
- arranging for a person to act as a nominee director or a nominee shareholder or trustee in relation to legal persons or arrangements
- providing a registered office, business address or accommodation, or a correspondence or an administrative address for a company, a partnership or any other legal person or arrangement
Please refer to the Anti-Money Laundering and Countering Financing of Terrorism (Definitions) Regulations 2011 for more detail.
WHAT DO I HAVE TO DO?
Some examples of things reporting entities will be required to do are:
- develop an assessment of the money laundering and terrorism financing risks that your business faces
- appoint an AML/CFT compliance officer
- design and implement an AML/CFT programme that sets out procedures, policies, and controls for (among other things):
- vetting and training certain staff
- undertaking risk-based due diligence on your customers
- undertaking on-going due diligence and account monitoring
- reporting suspicious transactions
- record keeping.
While the Act does not come into full force until 30 June 2013, it is important that reporting entities start planning for implementation as early as possible. You should familiarise yourself with the AML/CFT Act and its requirements. You may also want to:
- plan and allocate resources to develop AML/CFT risk assessments and programmes
- take advantage of outreach opportunities (eg. seminars) which are available, including those offered by government and private sector agencies
- get in touch with your AML/CFT supervisor so that you can receive communications about information or guidance they are distributing.
WHO WILL BE MY AML/CFT SUPERVISOR?
This depends on what type of entity and/or type of product or service that you provide.
- The Reserve Bank will supervise banks, life insurers and non-bank deposit takers
- The Financial Markets Authority will be the supervisor for issuers of securities, trustee companies, futures dealers, collective investment schemes, brokers and financial advisers
- The Department of Internal Affairs will supervise casinos, non-deposit taking lenders, money changers and other reporting entities that are not covered by the Reserve Bank or Financial Markets Authority.
The Financial Markets Authority took over the AML/CFT functions of its predecessor, the Securities Commission of New Zealand, on 1 May 2011.
CAN I GET AN EXEMPTION?
The AML/CFT Act provides for exemptions. The Minister of Justice can make recommendations to the Governor-General for exemption by regulation. The Government recently published regulations which included a number of exemptions for services, and exclusions from the definition of reporting entity (which removes the capture of the Act).
The Minister of Justice is also able to grant Ministerial exemptions for reporting entities or transactions. The Ministry of Justice manages the application process for Ministerial exemptions.
More detailed information about exemptions by regulation and how to apply for a Ministerial exemption is available here.
WHERE CAN I GET MORE INFORMATION?
Further information is available on the following websites:
If you still have questions and cannot find the answer on this website or other AML/CFT agencies, please email us in the International Criminal Law Team international.crime@justice.govt.nz. We will do our best to assist you.
MORE FAQs
WHAT IS AN AML/CFT RISK ASSESSMENT?
AML/CFT supervisors have recently published a guideline for reporting entities on risk assessments. A copy is available here.
The AML/CFT Act requires that in identifying money laundering or terrorism financing risk a reporting entity must consider each of the following:
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the nature, size and complexity of your business
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the types of products or services you provide
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the methods by which you deliver products and services to your customers.
In particular, the Act requires that you have regard to whether any of your products involve new or developing technologies which may favour customer anonymity. There are also specific requirements in the Act for particular activities such as wire transfers and correspondent banking relationships.
Your risk assessment will need to assess AML/CFT risk associated with these products and services:
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the types of customers you deal with. There are specific requirements in the Act for "politically exposed persons" (individuals who hold prominent public functions in overseas countries) and your AML/CFT risk assessment will need to take this into account
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the foreign jurisdictions with which you deal
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the institutions you deal with
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any other matters set out in regulations, codes of practice or guidance material.
WHAT IS AN AML/CFT PROGRAMME?
An AML/CFT programme will set out your procedures, policies and controls for detecting, managing and mitigating the risk that your business may reasonably face for ML/FT. The programme must be set out in writing and be based on your risk assessment. The AML/CFT programme must include:
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vetting senior managers and staff engaged in AML/CFT related duties
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training senior managers and relevant staff on AML/CFT related matters
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complying with customer due diligence (CDD) requirements, including determining when enhanced CDD is required, when simplified CDD might be permitted, and when CDD can be carried out by a person other than the reporting entity
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reporting suspicious transactions
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monitoring and record keeping, especially in relation to specified high-risk transactions and business relationships
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policies and procedures for how you will manage and mitigate your risks of money laundering and financing of terrorism
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monitoring and managing compliance with the AML/CFT programme.
Reporting entities should have appropriate risk-based systems and controls in place so that your business can meet the requirements of the Act. These systems and controls are based on the nature, size and complexity of your business and the money laundering and financing of terrorism risks you may face.
WHAT IS AN AML/CFT COMPLIANCE OFFICER?
You must designate an employee as an AML/CFT compliance officer to administer and maintain the AML/CFT programme. The AML/CFT compliance officer must, where relevant, report to a senior manager of the reporting entity. (If you are self-employed, you can be the AML/CFT compliance officer for your firm.)
WHAT IS CUSTOMER DUE DILIGENCE?
Customer due diligence (CDD) involves gathering information about the customer identity and also verifying your customer's identity to ensure the customer is who they say they are. In many cases the Act also requires you to establish the identity of the beneficial owner (the person who owns more than 25% of, or exercises effective control over, the customer).
DO I NEED TO IDENTIFY EXISTING CUSTOMERS?
The timing of when you need to identify an existing customer will depend on:
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the level of risk that the customer presents
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whether there has been a material change in the nature or purpose of the existing business relationship
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whether the information currently held on the customer is sufficient.
WHAT IS ONGOING CUSTOMER DUE DILIGENCE?
Ongoing customer due diligence involves reviewing your customer information and having programmes in place to conduct account monitoring. Ongoing due diligence is required for all customers, including existing customers.
WHAT IS A DESIGNATED BUSINESS GROUP?
The Act allows for certain entities to form a Designated Business Group (DBG). DBGs may share certain compliance responsibilities. To form or become a member of a DBG you must meet the eligibility criteria in the DBG definition (see section 5 of the Act) and elect to join the DBG through the process specified in the regulations.
Groups may be:
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related companies (each member must be related to each other member of the group)
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entities providing services under joint venture agreements (each member must be party to the agreement)
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a government department, a state enterprise or a Crown entity or a person related to these entities through the provision of common products or services
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money transfer service provider agents and subagents
An election to form or joining a DBG must be made in writing in the form issued by supervisors and contain (among other things) sufficient information to determine the entity is eligible. More information about designated business groups will be provided by AML/CFT supervisors over the implementation period.
WHAT ARE CODES OF PRACTICE?
The Act provides for codes of practice which will provide reporting entities with a method of compliance which if followed will essentially be treated as compliant with the Act.
Codes will provide businesses with a level of certainty about regulatory expectations, but if necessary, latitude to approach legislative obligations in other ways more relevant to their business.
Codes of practice will also be developed by supervisors, but must be approved by AML/CFT Ministers (those Ministers responsible for AML/CFT supervisors which are currently the Ministers of Commerce, Finance and Internal Affairs).
The first code of practice will be about identity verification. Industry was consulted on the content of this code of practice at the same time as regulations during 2010. The Department of Internal Affairs is the AML/CFT supervisor who is managing the development of this code of practice. Any queries should be directed to amlcft@dia.govt.nz.
