Further consultation on regulations for the first phase of reform

The Ministry of Justice has issued a consultation paper on a proposed further set of regulations under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act) to resolve some outstanding administrative matters arising for the first phase of the new anti-money laundering regime. These include:

  • the prescription of an annual reporting form for reporting entities' risk assessment and AML/CFT programmes instead of the current Annual Reporting Regulation;
  • information that must be contained in a Suspicious Transaction Report; and
  • a number of minor and technical amendments which are required to clarify or address oversights in the set of regulations promulgated under the AML/CFT Act in June 2011 (including, further clarification for the exemption for non-finance businesses from obligations in respect of certain types of consumer credit).

Some further policy matters are also raised for consultation. These include:

  • Expanding the simplified customer due diligence (CDD) measures to include:

    • foreign publicly-listed companies that are listed on a recognised overseas stock exchange that has sufficient disclosure requirements and that are listed in a country with sufficient anti-money laundering and countering financing of terrorism systems and measures in place; and

    • reporting entities that are supervised or regulated under the AML/CFT Act and that are licensed or regulated in accordance with the Insurance (Prudential Supervision) Act 2010, the Reserve Bank of New Zealand Act 1989 or the Non-bank Deposit Takers Bill.

  • Regulating for CDD to be conducted where there is a suspicion of money laundering/ terrorism financing (ML/TF), regardless of exemptions or thresholds that are referred to elsewhere in the AML/CFT Act and Regulations.

  • Explicitly requiring ordering institutions to obtain (but not verify) information on the beneficiaries of international wire transfers, and beneficiary institutions to carry out CDD in accordance with the AML/CFT Act (including verification) on customers that receive international wire transfers.

  • Reviewing the terms of the exemption from beneficial ownership obligations for custodial account holders to address certain impracticalities, disproportionate compliance costs and commercial sensitivities.

  • Making a minor clarification in the definition of stored value instrument (SVI), some adjustments to the SVI exemption and making increasing value on a SVI an occasional transaction, to better manage residual risks of ML/TF.

  • A proposal to exempt entities that carry out auctions within the meaning of clause 65 of the new Consumer Law Reform Bill. This would capture auctions in which property of any kind (including goods, services, and interests in land) is offered for sale by an auctioneer on behalf of a vendor, and:

    • bids for the property are placed with the auctioneer in real time; and

    • the property is sold when the auctioneer indicates.

  • A proposal to exempt internet auction providers that carry out internet-based auctions. This includes internet auctions that provide that any contract of sale resulting from the process is a contract directly between the winner of the bidding and the seller of the property.

Submissions on the consultation paper close on 17 August 2012. It is anticipated that final decisions on regulations will be made and communicated in October 2012 and the regulations should be in place by January 2013.

Are you ready for the commencement of the new regime?

From 30 June 2013 all reporting entities (as defined in the AML/CFT Act) will have to be compliant with the AML/CFT regime unless covered by an exemption. Reporting entities will have a range of responsibilities, including the requirement to have in place an appropriate transaction monitoring system, and will be supervised by one of the three supervisors of the AML/CFT regime: the Financial Markets Authority (FMA), the Reserve Bank of New Zealand and the Department of Internal Affairs.

FMA has drawn a provisional list of 587 businesses which have been identified as reporting entities under the new regime (falling under the supervision of the FMA) from the Financial Service Providers Register. These include issuers of securities, trustee companies, futures dealers, collective investment schemes, brokers and financial advisers. The list is available here.

Banks, life insurers and non-bank deposit takers are supervised by the Reserve Bank of New Zealand and can access information here. Casinos, money service businesses (including currency exchange and money remittance/transfer), payroll remittance, lending and other services (including non-bank non-deposit-taking lenders, debt collection and factoring), financial leasing, cash transporters, safe deposit/cash storage, and issuing and managing means of payment (including non-bank credit card providers) and any other reporting entities not supervised by the Reserve Bank of New Zealand or FMA will be supervised by the Department of Internal Affairs and can access information here.

For an overview of the new regime and more details on reporting entities click here.

The second phase of the AML/CFT reform will consider the extension of coverage of the regime to a range of designated non-financial services and professions including (but not limited to) lawyers, accountants, real estate agents, conveyancers and jewellers.