Expiring regulations: Update June 2021

22 June 2021

In December 2020 we shared that Cabinet had agreed to make changes to the AML/CFT Regulations. The Ministry of Justice released the documents about these decisions on their website. The changes and the impact on reporting entities supervised by the Department of Internal Affairs are summarised below. Please read these changes to be aware of how they may affect your business.

The amended AML/CFT Regulations will be in force on 9 July 2021.

AML/CFT Regulation	Change	What this means for DIA reporting entities
New regulation	Extend the default timeframe for AML/CFT audits to every three years, with some businesses potentially being eligible to be audited every four years.	AML/CFT audits will be required every three years. DIA can request a more frequent audit or a less frequent audit.
New regulation	Exempts liquidators appointed by the High Court under s241(2)(c) of the Companies Act from some customer due diligence requirements.	This affects reporting entities that are liquidators. If you are appointed by a Court, you will not have to conduct initial customer due diligence on the liquidated company. Requirements continue relating to payments to beneficial owners, wire transfers, prescribed transaction and suspicious activity reporting.
New regulation	Wholly exempts transactions where a client pays money for specific low-risk disbursements, such as when a lawyer receives money to file an application in a Court.	You will no longer be captured under the AML/CFT Act when you receive funds from clients to pay certain types of low-risk payments, such as to government departments, some professional services (on behalf of your client), and some payments within NZ of less than $1000. This means you will not have to conduct customer due diligence on the client and cease acting for the client if customer due diligence cannot be conducted.
New regulation	Ensures that limited partnerships can more easily be included in designated business groups	Limited partnerships will be eligible for inclusion in a designated business group where they are related to the other members of the designated business group.
New regulation	Reduces the potential for a business to unintentionally tip off people who are subject to a Police inquiry.	You will be exempt, for 30 days unless otherwise notified by the Police, from having to conduct enhanced due diligence in respect of the subject of a Commissioner’s Order. (A Commissioner’s Order is when the Commissioner of Police requires information relevant to a suspicious activity report or prescribed transaction report.)
New regulation	Protects businesses from companies that misuse nominee director relationships to obscure their beneficial owner.	You will have to obtain information from customers, who are companies, as to whether there are any nominee director relationships or nominee shareholder relationships. If the company declares that such a relationship exists, you will then be required to conduct enhanced customer due diligence on that customer.
Definitions regulation 3 – expiry date	The expiry date will be removed.	You can now have certainty that the current regulatory environment will continue after 27 July 2021.
Definitions regulation 13A – Inclusion: wire transfer of more than $1,000	Clarifies that this regulation applies to ordering institutions for wire transfers that occur outside of a business relationship with a customer, as well as applying to beneficiary institutions for wire transfers that are received outside of a business relationship with a customer.	This clarifies that AML/CFT obligations apply to an ordering institution of a wire transfer of more than $1000 if the reporting entity does not have a business relationship with the person sending the funds. This also clarifies that AML/CFT obligations apply to a beneficiary institution of a wire transfer of more than $1000 if the reporting entity receives funds for somebody with which it does not have a business relationship.
Definitions regulation 15 – Inclusion: transactions involving certain stored value instruments	Amends the definition of ‘debit card’ so that the reference to ‘financial institution’ does not apply to a non-finance business and ensures structuring with stored value instruments cannot occur.	The change prevents multiple transactions or stored value instruments being issued to avoid the application of AML/CFT requirements. The change also clarifies that non-finance businesses, for example cafes issuing loyalty cards with funds held on account, are not captured as reporting entities.
New Regulation - 24AD	Clarifies obligations for reporting entities that are executors or administrators of estates. Replaces Regulation 20 (Definitions).	This affects you if you act as an executor or administrator of an estate. When doing so, you are exempt from the requirements of the AML/CFT Act, except for SAR reporting and associated record keeping.
New Regulation - 24AE	Clarifies obligations for reporting entities that provide relevant services to executors or administrators of estates. Replaces Regulation 20 (Definitions).	This affects you if you provide a relevant service to an executor or administrator of an estate, but you are not the executor or administrator yourself. In these circumstances, the executor or administrator of the estate is your customer under the AML/CFT Act. You are required to fully comply with the Act in relation to this person, except for the requirement to verify source of wealth or funds if conducting enhanced CDD and to terminate the business relationship if CDD cannot be conducted. Note: There is an exception to this. In circumstances where the executor or administrator is another reporting entity, you are exempt from all CDD requirements. You must still comply with SAR reporting and record obligations.
Definitions regulation 20 – Exclusion	This regulation is revoked. This removes the current exemption (in some circumstances) from the AML/CFT Act when a trustee in respect of relevant services provided to beneficiaries of a family trust.	Providing relevant services as a trustee of a family trust is now always subject to the requirements of the AML/CFT Act.
Definitions regulation 21B – Exclusion: persons carrying out property management activities	Restructures the regulation to exclude the activity of property management from the scope of ‘managing client funds’ instead of excluding reporting entities which only provide that activity.	This clarifies that AML/CFT obligations do not apply to property management activities even when you provide other real estate services which do attract AML/CFT obligations.
Definitions regulation 24A - Time at which real estate agents must conduct customer due diligence	Real estate agents that engage in commercial leasing will be required to conduct customer due diligence on the landlord when an offer to lease is presented, rather than when they sign an agency agreement.	For commercial leasing, real estate agents will now only be required to conduct customer due diligence on the landlord when an offer to lease is presented (rather than when they sign an agency agreement). For other types of real estate transactions, the timing of customer due diligence remains the same.
Exemptions regulation 3 – expiry date	The expiry date will be removed. This will provide business with more certainty.	You can now have certainty that the current regulatory environment will continue after 30 June 2020.
Exemptions regulation 8 – Transactions that are not occasional transactions or wire transfers exempt from section 49(2)(d) of Act	Updates this regulation to ensure clarity and ensure that transactions below applicable thresholds are exempt from record keeping requirements and repeals regulation 8(3) as it is unnecessary.	This change is unlikely to have any practical effect. It clarifies that for low value transactions that occur outside of a business relationship that are not occasional transactions (as defined), you will not have to keep a record of the parties to the transaction, though all other record keeping requirements will still apply.
Exemptions regulation 15 – Relevant services provided in respect of certain stored value instruments	Amends the definition of ‘debit card’ so that the reference to ‘financial institution’ does not apply to a non-finance business and ensures structuring with stored value instruments cannot occur.	The change prevents multiple transactions or stored value instruments being issued to avoid the application of AML/CFT requirements. The change also clarifies that non-finance businesses, for example cafes issuing loyalty cards with funds held on account, are not captured as reporting entities.
Exemptions regulation 16 – Relevant services provided to related entities	More types of businesses will be captured by the ‘related businesses’ exemption.	AML/CFT obligations do not apply to relevant services provided to related entities. The definition of ‘related’ will include entities where A is ‘controlled’ by B (and vice versa) or where A and B are both ‘controlled’ by C.
Exemptions regulation 17 – Relevant services provided under premium funding agreement by insurance company Exemptions regulation 18 – Relevant services provided under premium funding agreement by non-insurance company	The definitions for both regulation 17 and regulation 18 are contained within regulation 17, which has the potential for confusion. As the regulations are similar in scope it is appropriate to amalgamate the regulations.	No change to AML/CFT obligations. This is to reduce duplication of definitions.

We have developed some questions and answers – read those here: Frequently Asked Questions.

For any questions about how these regulations affect your business, please contact us at amlcft@dia.govt.nz.

Te Tari Taiwhenua | Department of Internal Affairs

Building a safe, prosperous and respected nation

Expiring regulations: Update June 2021