FOUR FAST FACTS ON: AML/CFT REGULATORY CHANGE AND ENFORCEMENT
AUGUST 2023
Regulatory updates
The first tranche of changes to the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Regulations came into force on 31 July 2023, and will be followed by further amendments that take effect from June 2024 and June 2025.
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Legislative change
Many of the proposed regulatory changes require amendments to the AML/CFT Act that must be passed by Parliament. These include:
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Most of the recent amendments were designed to clarify existing obligations or relieve reporting entities of obligations altogether. Notable among these are the clarifying changes to the definition of “beneficial ownership” and “person on whose behalf a transaction is conducted”.
Future amendments will require reporting entities to obtain more information, when conducting customer due diligence (CDD) on legal persons and legal arrangements, and to risk-rate customers.
Pecuniary penalty on broker
Recent enforcement proceedings taken by the Financial Markets Authority (FMA) have seen a fintech company ordered to pay $900,000 for breaches of the AML/CFT Act relating to CDD, termination of business relationships, reporting suspicious activity and record-keeping. The breaches date back to the 2019 - 2020 period.
This penalty followed a public warning to the fintech for its AML/CFT non-compliance back in April 2020. The FMA’s further investigation and pursuit of penalties, for conduct in the same time period, will be of concern to many reporting entities. Clearly, a warning may signal the beginning, and not the end of the matter for the FMA.
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the relaxation of the requirement to conduct address verification under standard CDD; and
the prescription of the process that reporting entities must follow when conducting enhanced customer due diligence (ECDD) on trusts.
These changes are not part of any Bills before Parliament and it’s uncertain when we might expect to see legislative change –particularly in an election year. 4
Focus on real estate
In recent months we have seen an increased focus by the Department of Internal Affairs (DIA) on the real estate sector, with two formal warnings issued to real estate agents. Agents can “expect stronger action in the future from DIA for serious breaches of the AML/CFT Act”.
In April 2023, an agency was warned for failures with respect to its AML/CFT programme and conduct of CDD.
In May 2023, another agency was similarly warned for failures relating to its AML/CFT programme and its conduct of ongoing CDD (and other monitoring and reviews) to identify grounds for reporting suspicious activity. It also admitted failures in recordkeeping.