Neil Sands
AML supervisors will have stronger powers to search properties and question suspects during investigations under the latest bill introduced to Parliament to fix a regime the government says is “no longer fit-for-purpose”.
The Anti-Money Laundering and Countering Financing of Terrorism (Supervisor, Levy, and Other Matters) Amendment Bill passed its first reading on Tuesday, when it was referred to the Economic Development, Science & Innovation Select Committee.
The bill introduces an AML levy to be paid for by industry, makes the Department of Internal Affairs (DIA) the sole AML supervisor and gives the DIA the ability to adopt a flexible, risk-based approach, rather than imposing one-size-fits-all rules.
“I’ve heard from many New Zealanders about the frustrations of the current system,” Associate Justice Minister Nicole McKee told Parliament.
“It’s complex, obstructive and places repetitive, burdensome obligations on businesses. It fails to take a truly risk-based approach and often treats all businesses the same, regardless of the risks that they pose.”
Associate Justice Minister Nicole McKee
McKee said the bill meant the AML regime would no longer over-regulate low-risk activity, instead focusing on high-risk threats to meet its core objective of fighting crime.
The bill will allow AML enforcement officials to compel suspects to attend meetings and seek warrants to search homes, which McKee said addressed gaps in their current powers.
“Many obligated businesses now operate from private dwelling. While most comply, some do not, and the supervisors currently lack the tools to effectively monitor them,” she said.
“This amendment will give the supervisor the power to enter private dwellings used for business activities captured under the Act, ensuring enforcement can occur where it is most needed.”
Suspects will still have the right to refuse to answer incriminating questions and authorities cannot compel disclosure of privileged communications.
The three-body problem
The bill sets up the DIA as the sole AML regulator – a role it previously shared with the Reserve Bank and the Financial Markets Authority – which McKee said would streamline decision-making and improve consistency.
She said the bill also changed the way the DIA will oversee AML compliance.
“[It] shifts many prescriptive regulatory requirements into more flexible secondary legislation such as codes of practice, rules and notices,” she said.
“The over-reliance on rigid regulations has been a direct result of the three-supervisor model. With a single supervisor, we can now adopt more agile, responsive ways of setting and updating obligations, tailored to evolving risks and business needs.”
One of the bill’s most controversial measures is the introduction of an industry levy, which critics say increases compliance costs but McKee argues is needed to fund the new regime.
“The levy will be proportionate to risk and capacity to pay, targeting larger, profitable, high-risk sectors such as banking, while protecting the viability of smaller businesses,” she said.
“This is consistent with international practice and will ensure that those who benefit most from a safe financial system contribute to maintaining it.”
Labour justice spokesman Duncan Webb said the levy forced industry to pay for criminal enforcement measures which the government should be funding as part of its duty to uphold the law.
“The detection of organised crime, the prosecution of money laundering is a core function of the state. It isn’t something which is a collateral benefit to the finance industry, and [it’s not something] they should pay for,” he said.
More legislation coming
The latest bill is the second of three pieces of legislation targeting AML reform.
The first, the AML-CFT Amendment Bill, passed its first reading in February and is currently before the select committee, with a report due on August 13.
It tweaks existing legislation “to provide immediate regulatory relief” to business.
A third bill, the AML-CFT(Omnibus) Amendment Bill, is expected to be introduced to Parliament in mid-2026, finalising the reform program.
It includes:
- Simplified customer due diligence for low-risk individuals and activities such as opening children’s bank accounts and using digital wallets;
- Simplified compliance for small businesses in rural areas; and
- New powers to combat criminal activity, such as a $5,000 cap on payments of cash for international transfers and banning crypto ATMs.
Labour’s Ginny Anderson questioned why the reforms had been staggered over three bills.
“I’m interested to know, and I’m sure we’ll find out down the line, why we’ve had three separate ones and why they weren’t bundled as one piece of legislation. Whether the government hasn’t got enough legislation – is that why it’s been torn apart? I’m not sure why they’re separate.”
A select committee report on the bill is due by November 24.
0 Comments