Regulatory Influencer: New Zealand’s AML Levy - Privatising the Cost of Effective Supervision, A One-Off or More to Come?

The New Zealand Ministry of Justice (MoJ) has released the AML levy proposal outlining its plans to impose a charge on anti-money laundering (AML) reporting entities to fund the establishment and running of a standalone AML regulator for the country.

While the AML Amendment Bill and the AML Supervisor and Levy Bill, which form the legal basis for this proposal, have yet to be passed in parliament, the levy’s stated implementation date of July 2027 could mean a costly recurring bill for AML reporting entities from next year.

The bigger picture

New Zealand is currently in the midst of major AML reforms largely aimed at addressing deficiencies cited by the Financial Action Task Force (FATF) during its 2021 mutual evaluation report.

One of the principal deficiencies that FATF identified is the lack of a singular AML regulator, with AML enforcement and regulation in New Zealand at present being split between the following patchwork of entities:

• The Reserve Bank of New Zealand (RBNZ), which supervises banks, life insurers and non-deposit takers.
• The Financial Markets Authority (FMA), which supervises other financial service providers including insurers, brokers, fund managers and advisors.
• The Department of Internal Affairs (DIA), which supervises casinos, money changers and other designated non-financial businesses including lawyers and accountants.

To overcome this, the New Zealand government plans to designate the DIA as the principal AML regulator for all entities and consequently merge the functions held by the RBNZ and FMA at present under it.

The cost of this move is likely to be expensive for the government, and the MoJ plans to fund both the establishment and continued operation of the DIA by imposing a levy on what it considers to be high- and medium-risk reporting entities.

The MoJ breaks these down into three main categories of entities, namely:

• Banks
• Casinos and TAB (New Zealand’s state sports-betting monopoly).
• Other medium and high-risk financial businesses and designated non-financial business operators, including virtual asset service providers (VASPs), payment service providers (PSPs) and remittance operators.

Under the proposal, these entities would be expected to fund an average annual cost of NZ$22.5m (US$13m) over the next five years to cover the operation of the DIA, the MoJ and the Police Financial intelligence Unit (FIU), in proportion to what the MoJ estimates their use of AML resources to be:

• Banks incurring 85 percent of the total annual levy.
• Casinos and TAB incurring 9 percent of the total annual levy.
• Other medium and high-risk financial businesses incurring 6 percent of the total annual levy.

The imposition of the AML levy is likely to have both immediate and long-term effects on banks, the gambling industry, PSPs and indeed their customers.

In the short term

The levy places an immediate financial burden on all high and medium-risk reporting institutions. The severity of this burden depends on the industry in question:

• Banks:
  • To recoup 85 percent of the costs, the MoJ estimates imposing a levy of 0.00322 percent of reported bank assets per year ranging from NZ$0.083m to NZ$6.762m (see page 24 of the levy consultation).
  • The MoJ states that this equates to 0.2 percent of banks cumulative pre-tax profits, but with profit margins in the banking industry being as thin as they are already, it remains to be seen just how much of an impact this will make.
  • The MoJ also proposes to exclude banks with an asset cap of under NZ$1.5bn from the levy, providing at least some relief for smaller and/or newer banks.
• PSPs and VASPs
  • For PSPs and VASPs, any financial impact from the levy is likely to be minimal, with the MoJ estimating the imposition of a NZ$404 (see page 27) levy if they choose to adopt a fixed-rate approach.
  • The MoJ is also consulting on tying the levy to the number of compliance assessments carried out per entity type, which would instead result in levies ranging from NZ$580 to NZ$3,220, with VASPs paying the most.
• Casinos and TAB
  • To recover the stated 9 percent of the costs, the MoJ estimates imposing a levy of between 0.125 percent and 0.5 percent of expenditure/player loss data.
  • Based on 2023/2024 data, the MoJ expects the first-year levy to be set at 0.258 percent of expenditure/player loss data equating to a levy of NZ$0.040 to NZ$1.357m a year for existing operators.

Looking further ahead

The long-term effects of this AML levy are likely to be more institutional than financial, with all AML reporting entities having to align with the obligations set by a new regulator and the new policies and practices that come along with it.

For the casino industry, the MoJ states that it intends to apply the levy to online gambling operations when they do eventually get regulated, which means that they would be subject to the levy from the moment they begin operations.

Merchants and customers of banks and casinos may feel the effects of the levy as well if reporting entities decide to pass on the costs of paying it to them. 

Consumers and merchants are also likely to be left with fewer choices of payment, banking and gambling service providers if potential new entrants decide that New Zealand is simply too expensive a market to enter.

While PSPs may not be as significantly affected financially as other reporting entities, they may well feel that this is the latest in a number of business unfriendly regulatory requirements that New Zealand seems to be imposing on their industry, with the country already considering imposing caps on interchange fees and surcharges.

Next steps

All affected AML reporting entities should consider responding to the consultation by the stated April 10 deadline to ensure their views are taken into account, particularly as the MoJ considers whether to recoup the costs for the expected FY2026/2027 deficit in one go or over five years.

With the bill already in parliament, AML reporting entities should note that the levy's implementation is almost a certainty — the upcoming consultation will merely shape its final details. Affected entities must therefore proactively prepare for the financial costs expected in July 2027, and critically evaluate how this will impact their cost of doing business in New Zealand.

Beyond the levy, AML reporting entities must also prepare for New Zealand’s wider regulatory reforms. For example, the Anti-Money Laundering and Countering Financing of Terrorism (Omnibus) Amendment Bill, expected to be laid in parliament in mid-2026, will introduce a risk-based approach to customer due diligence and grant expanded investigative powers to authorities. The MoJ expects these reforms to take effect concurrently with the levy. Consequently, firms must be ready to update their internal processes and policies to align with a newly established regulator and forthcoming regulations.