Changes to AML/CFT law announced
Parliament’s Justice Select Committee has reported back on the Anti-Money Laundering and Countering Financing of Terrorism Amendment Bill. The Bill’s goals include providing regulatory relief, enhancing powers of government agencies and closing loopholes. I note below that the Committee has made positive changes to the Bill (all agreed unanimously), many in response to submissions (including Cygnus Law’s submission). However, the updated Bill doesn’t fully deliver on promises of substantial regulatory relief. This version of the Bill is likely to be passed into law though the timeframe for that is unclear. The Bill is one of four bills that update AML/CFT law in the process of being considered by Parliament. Some will provide additional regulatory relief including removing the requirement to verify addresses when standard customer due diligence is conducted.
Positive changes
PEP checks: Removing a requirement for reporting entities to use an “appropriate risk management system” to identify politically exposed persons (PEPs). Instead the Committee added a requirement that PEP checks are risk based, which is a helpful enhancement.
Risk assessments: Removing the proposal for risk assessments to comply with supervisor guidance with one to incorporate relevant risks identified in sector and national risk assessments.
Censures: Adding a process to be followed before a reporting entity can be “censured” (a new tool) and a right to appeal a censure, and retaining the ability for warnings to be issued.
Records: Any records requested by regulators must be provided “as soon as possible” (where there is an “urgent” need for them) or otherwise by any reasonable date (20 working days if no date). That replaces the initial proposal for all records to be provided “swiftly”.
MVTS: Clarifying the new defined term of “money or value transfer service” (although that term is not used in any current or proposed law) including so that it captures informal money remittance services e.g. Hawala services (but that might result in unintentional capture of other services).
Missed opportunities
Trust ECDD: Enhanced customer due diligence (ECDD) requirements for trust customers are reduced, where risks “have been mitigated”. In that case reporting entities are still required to “collect” SoW/SoF information on trusts but that information does not have to be “verified”. While that’s a welcome improvement, there is no policy reason to continue to require any ECDD for low risk trusts.
Beneficial owner definition: The Bill includes a replacement definition but has adopted the somewhat tortuous definition previously implemented via regulations. An opportunity was lost to simplify and clarify the definition in line with that used in other jurisdictions.
Some other notable reforms in the Bill
Cross-border transfer of stored value instruments: Removing double reporting in relation to the cross-border transfer of cash of at least $10,000 and extending the reporting obligation to the cross-border transfer of “stored value instruments”. Stored value instruments include vouchers and casino chips (that can be redeemed for cash) and gold, silver and other precious metals, and precious stones. Presumably gold teeth need to be accounted for. The practical implications of the stored value definition remain to be seen. Some clarification may come via regulations.
Compliance officer: Removing the requirement for the compliance officer to report to a senior manager, if the compliance officer is a senior manager (a positive change for small reporting entities). The right to appoint companies as compliance offers in some scenarios is removed.