New Zealand: Anti-Money Laundering And Countering Financing Of Terrorism Bill Introduced To Parliament

Last Updated: 2 July 2009
Article by Tracey Cross, Sue Brown, Alasdair McBeth and Rachel Taylor

Following the release of a draft Bill for public consultation in September 2008, and the recent publication of Cabinet papers and a regulatory impact statement, the Anti- Money Laundering and Countering Financing of Terrorism (AML/CFT) Bill (Bill) has finally been introduced to Parliament.

To read a copy of our October 2008 bulletin on the draft Bill please click HERE.

The Bill retains much of the framework of the draft Bill although there are several areas where substantial amendments have been made. The Bill is also much more comprehensive than the draft Bill with some of the prescriptive requirements bearing similarity to the Australian regime.

Summary - What are the changes?

The most important changes to the draft Bill include:

  • Reporting entities are now able to rely on the customer due diligence of 3rd parties. However, there are several requirements that must first be met by the entity.
  • Reporting entities must ensure that foreign subsidiaries and branches are compliant with the New Zealand regime.
  • If a customer is a trust then enhanced customer due diligence is required. The reporting entity must take all reasonable steps to identify the beneficial owner behind the trust.
  • The customer due diligence requirements have changed in relation to existing customers and more detail has been included around identification requirements.
  • Reporting entities are now required to prepare a 'risk assessment' before conducting customer due diligence. This is in addition to establishing an AML/ CFT compliance programme.
  • AML/CFT supervisors will have the power to issue non-mandatory codes of practice.
  • AML/CFT supervisors and the courts will have wider powers around the enforcement of AML/CFT compliance.

For more detail on these important changes please read on.

Third Party Reliance

One of the most important amendments to the draft Bill is the inclusion of provisions allowing reliance on third party customer due diligence. The Bill now provides scope for reporting entities to 'contract out' of certain AML/CFT obligations, as long as certain requirements are met (eg the third party must have a business relationship with the customer).

The Bill also allows a reporting entity to rely on the customer due diligence procedures of a person who is resident in a foreign country, provided that the country has sufficient AML/CFT systems and measures in place and the person is regulated or supervised for AML/CFT purposes. While this will reduce the compliance burden for many businesses, it should be noted that reporting entities will only be allowed to rely on third party customer due diligence. They will, however, still be obliged to implement their own AML/CFT programme and risk assessment in accordance with the Bill. Subject to any regulations, a reporting entity may also appoint an agent to conduct customer due diligence procedures on its behalf.

It is unclear what criteria will be used in determining whether a foreign country's AML/CFT regime is 'sufficient'. However, it seems likely that this will be specified in regulations, possibly through a schedule of 'grey list' type countries that meet Financial Action Task Force (FATF) requirements.

Finally, the Bill introduces the concept of a Designated Business Group (DBG), something that should be familiar to those reporting entities who are regulated under the Australian regime. A DBG is a group of related entities that 'shares' the AML/CFT burden. For example, one entity in the group may adopt parts of another entity's AML Programme or use another member's risk assessment. This will reduce compliance costs for those reporting entities with many subsidiaries/related businesses.

Foreign branch and subsidiary compliance

An important addition to the Bill is the requirement for reporting entities to ensure that branches and subsidiaries in foreign countries apply AML/CFT measures that are at least equivalent to those required in the Act and regulations. If the law of a foreign country does not permit the application of equivalent measures, the reporting entity must inform the AML/CFT supervisor of this fact and take 'additional measures' to effectively handle the risk of money laundering and financing of terrorism.

The Bill does not elaborate on what 'additional measures' would entail.

Customer due diligence

Customer due diligence requirements have received much greater clarification. The Bill now sets out exactly what information is required in order to properly identify a customer and provides more detail around how that information must be verified.

There have also been important changes around for which customers enhanced customer due diligence must be conducted. The Bill now specifies that enhanced customer due diligence is necessary for a customer that is:

  • A trust or another vehicle for holding personal assets. (The Bill requires that the reporting entity must take all reasonable steps to identify the beneficial owner. It is unclear how this will work in relation to discretionary trusts and this may need to be looked at more closely in select committee.)
  • A non-resident customer from a country that has insufficient AML/CFT measures in place.
  • A company with nominee shareholders or shares in bearer form.

Enhanced customer due diligence is also required for customers who are politically exposed persons and in other situations (such as where there is/is intended to be a correspondent banking relationship).

Requirements for conducting standard customer due diligence on existing customers have also been altered to some extent. The draft Bill required standard customer due diligence for existing customers only when doubt arose as to the adequacy or veracity of previously obtained identification or verification information. Under the Bill standard customer due diligence on existing customers is now required in the following additional circumstances:

  • If there has been a change in the nature or purpose of the business relationship.
  • If the reporting entity suspects that a transaction the customer is involved in may involve money laundering or the financing of terrorism.
  • If the reporting entity considers that, according to the level of risk involved, it has insufficient information about the customer.

AML/CFT compliance programme

The establishment of an AML/CFT compliance programme is still one of the core requirements of the Act (and possibly the most costly). The Bill prescribes the content of an AML/CFT compliance programme and requires the appointment of an AML compliance officer. One important requirement is that an AML/CFT compliance programme contain procedures for vetting and training senior managers, the AML/CFT compliance officer, and other employees with AML/CFT duties. More detail in this regard is likely to be introduced via regulations.

The Bill also now requires reporting entities to conduct a 'risk assessment' before conducting customer due diligence or establishing an AML/CFT compliance programme. A risk assessment consists of a written report assessing the risk of money laundering and financing of terrorism that the entity may reasonably expect to face in the course of its business. The Bill prescribes the form and content of the risk assessment.

Both the AML/CFT compliance programme and risk assessment are to be independently audited once every two years - or at any other time if requested by an AML/ CFT supervisor.

Codes of practice

Under the Bill AML/CFT supervisors may be directed by the responsible Minister to prepare codes of practice for relevant sectors. The purpose of a code is to provide a statement of practice that assists reporting entities to comply with their obligations under the regime. Compliance with a code of practice will not be mandatory but compliance will be a strong defence if a person is charged with an offence under the Act.


There have been several amendments in the area of enforcement. Under the Bill:

  • Criminal liability can now attach to senior managers of a reporting entity that commits an offence under the Act. The definition of senior manager is broader than 'executive officer' and includes directors, positions comparable to directorship in an entity that is not a company (trustee, partner etc), and any person occupying a position within a reporting entity that allows that person to exercise influence over the management or administration of the entity (CEO, CFO etc).
  • AML/CFT supervisors will have the power to issue formal warnings and accept enforceable undertakings (much like those taken by the Securities Commission now).
  • The High Court may issue a 'performance injunction' requiring a person to do an act or thing where failure to do an act or thing would constitute a civil liability act.
  • The High Court may also issue a 'restraining injunction' restraining a person from engaging in conduct that contravenes or would contravene the Act.
  • Pecuniary penalties have changed slightly.
  • AML/CFT supervisors' search and seizure powers have been limited to some extent.


The Bill was introduced to Parliament on 25 June 2009. Once it passes its first reading it will go to select committee where there will be a call for submissions. The Ministry of Justice has indicated that the Bill is to be enacted as quickly as possible and should be law by the end of 2009 or early 2010. Cabinet has recommended a two year transition period to give reporting entities enough time to put AML/CFT systems in place.

How can we help?

DLA Phillips Fox has a great deal of experience in the area of anti-money laundering and has already helped a number of clients through the implementation of the regime in Australia.

We can help you be ready for the new AML/CFT regime by advising on the implications that it will have for your business. We are also happy to work with you in preparing submissions on the Bill, and, once the Bill becomes law, advising on the preparation of your AML/CFT compliance programme.

Phillips Fox has changed its name to DLA Phillips Fox because the firm entered into an exclusive alliance with DLA Piper, one of the largest legal services organisations in the world. We will retain our offices in every major commercial centre in Australia and New Zealand, with no operational change to your relationship with the firm. DLA Phillips Fox can now take your business one step further − by connecting you to a global network of legal experience, talent and knowledge.

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.