The long awaited review of the Ministry of Justice’s Review of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 was released in November 2022. This statutory review assessed how well the legislation has performed since 2017 as well as whether any amendments should be made. It produced 215 recommendations including proposed amendments to the Act, use of regulations and operational enhancements.
Does the Act help to deter money laundering?
Cost
The Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT ) regime costs New Zealand approximately NZD 260 million per annum, with the bulk of the burden on the private sector at NZD 246 million. So it is important to know how effective it is and where the gaps are.
Benefits
The Ministry estimates that the regime’s monetary and non-monetary benefits are significant, including disrupting NZD 1.7 billion worth of illegal drugs and fraud and NZD 5 billion of broader criminal activity over a ten year period.
It also estimates that the cost of an AML/CFT regime, or a significantly weaker one, would damage New Zealand’s international reputation resulting in an estimated reduction of capital inflows of between 4.6 percent and 10.5 percent of GDP; between NZD 15 and 35 billion annually, or 58 to 134 times the estimated cost of the regime.
Is the regime working well?
Both the Ministry and the Financial Action Task Force 2021 Mutual Evaluation found that the existing regime provides a good basis for controlling money laundering and terrorism financing.
But it is not as effective as it could be for several reasons:
- lack of a sufficiently risk-based approach. Efforts by agencies and businesses are not always being prioritised towards areas of highest risk. Some requirements in the Act are overly prescriptive;
- lack of an up-to-date national assessment of risks;
- a number of important gaps in the Act’s measures to deter money laundering and terrorism financing; and
- insufficient resourcing for the regime.
When will change happen?
The substantive work of the 215 recommendations will take some time to be implemented and many will require more work with businesses and regulators.
In the interim Justice Minister Kiri Allan announced immediate minor changes to increase ease of business. These were
- relaxing the requirement on businesses to verify the address of most customers;
- extending the timeframe for businesses to submit Prescribed Transactions Reports;
- and exempting registered charities from AML/CFT obligations when they are providing small loans.
