The New Zealand government has announced plans to introduce a single regulator to oversee its new anti-money laundering (AML) regime, in an effort to “streamline” the compliance burden for firms.
In the latest major update to its AML regime, New Zealand is set to move towards a “super” regulator with a new funding structure, while the current multi-agency approach will be phased out.
A single supervisor model will replace the current three-supervisor model, and will establish the Department of Internal Affairs as the sole supervisor of the AML/counter-terrorism financing (CFT) system.
Supervision of different parts of the AML/CFT system is currently overseen by the Reserve Bank of New Zealand, the Financial Markets Authority (FMA) and the Department of Internal Affairs.
Nicole McKee, associate justice minister, said the reforms will lead to a “more agile” AML regime, more focused on the risks posed by money laundering to New Zealand businesses.
“The changes will deliver a critical government priority to reform key sectors where the cost of regulation is overly burdensome for businesses, and improve the efficiency and effectiveness of the AML/CTF system to meet international standards,” she said.
“I have heard from countless New Zealanders that the current regulations are unnecessarily risk-averse, resulting in complicated, repetitive processes. Simple tasks shouldn’t be made confusing and difficult to complete.”
The government is pursuing the changes following a Financial Action Task Force (FATF) evaluation of New Zealand’s regulatory regime and a subsequent review of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009.
McKee, who described the reforms as the “most significant” since the AML/CFT Act came into force in 2013, said the government will also move quickly to introduce new industry guidance and codes of practice under the new regime.
Funding via an industry levy
If the proposed changes go ahead, another new addition will be the introduction of an “industry levy” to support AML supervision.
“The funding model will establish an industry-levy to support a flexible and coordinated system that will deliver sector benefits,” said McKee.
“The levy will be designed to ensure that costs are equitable and reasonable for the sector and will not place undue burden on small businesses.”
A new AML/CFT National Strategy and work programme would also be introduced as part of the funding model.
Legislation will require any amendments to the levy to be informed by the national strategy and work programme.
“This work programme will be developed in partnership with industry and agreed by Cabinet to ensure that the AML/CFT system is focused on industry priorities,” said McKee.
“The changes will ensure New Zealand maintains its international reputation and will align our AML/CFT system with the financial sectors of our key trading partners.”
Timeline of reforms
The Cabinet has already approved the proposed reforms, which will be undertaken in three parts.
The first part, which aims to deliver regulatory relief to New Zealand businesses, will be achieved via two bills — one of which, the Statutes Amendment Bill, has already been introduced to parliament.
The second part will focus on structural changes to the AML supervisory agency and funding model, while the final part will aim to introduce more risk-based controls in line with international standards.
McKee noted that her party, ACT New Zealand, campaigned during the 2023 general election on making AML compliance user-friendly for small businesses.
Finishing in fourth place with just under 9 percent of the vote, ACT formed a coalition with the centre-right New Zealand National Party, which won the largest share of the national vote, and New Zealand First.
Industry response
The Cabinet’s plans, announced in the past two weeks, have not yet been fully evaluated by New Zealand’s financial sector.
FinTech NZ, which spoke with Vixio about the reforms, said it does not have an official position at present, as it is not in a position to adequately review the plans.
However, Jason Roberts, executive director of FinTech NZ, said that in principle the association agrees with the Cabinet’s aims to bring “simplicity and efficiency” to New Zealand’s AML regime.
Roberts added that this could be further achieved through the use of regulatory technology (regtech) solutions by firms.
However, he also warned that switching from three AML regulators to one may be easier said than done.
“A change that looks simpler on the surface is not always the case, especially if new systems and processes from one regime have to now be unwound and then the new regime then developed,” he said.
“This actually introduces cost and potentially more burden than at present. There may also be specialities that other agencies better address. It needs further investigation and public consultation.”
Vincent McCartney, co-founder of RegTech NZ, also noted that the single regulator model may lead to an overworked Department of Internal Affairs (DIA).
“The DIA is already a behemoth of a government department,” he said. “With the government trying to slim down departments and budgets, is there a danger of pouring more money into the DIA and bloating it even more?
“Which may result in a slow-moving waste of taxpayer funds.”