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.

Enforcement

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.

Timing

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 Mondaq.com.

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

Authors
 
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”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions