Phase 1 and 2 of the AML/CFT Act in New Zealand

01 July, 2021

Understanding the changes and your obligations

When the New Zealand Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT Act) was first passed in 2009, only financial institutions were required to comply. However, as concern about money laundering and the financing of terrorism has grown, the Act has been expanded to include a broader range of organisations. 

This second part of the Act (which covers reporting entities) is referred to as Phase 2. These changes have not only put New Zealand in line with global standards but also give the NZ public added confidence in our financial system. 

In a nutshell, the AML/CFT Act (and its associated regulations) place obligations on financial institutions to detect and deter money laundering and terrorism financing.

Here’s what you need to know about the two phases.

Phase 1 explained

At the inception of the AML/CFT Act, Phase 1 came into force. This meant businesses such as banks, casinos, certain trust and company service providers and certain financial advisers had to comply with the regulations and reporting requirements as set out by the Act.

Phase 2 explained

The implementation of Phase 2 was set in motion through an Amendment Bill to the AML/CFT Act, passed in August 2017. Its purpose was to extend the Act to cover additional higher-risk AML/CFT entities and was predicted to disrupt up to $1.7 billion worth of illegal drugs and fraud in New Zealand.

Phase 2 extended the Act to include real estate agents, lawyers, accountants, conveyancers, some businesses that deal in high-value goods and betting on sports and racing. Given the greater scope, Phase 2 was put in place using a staggered approach. 

All additional businesses are now required to comply with the same obligations as existing reporting entities. 

This includes:

  • Carrying out risk assessments
  • Implementing an AML/CFT programme
  • Appointing a compliance officer
  • Doing customer due diligence
  • Establishing systems and processes for reporting suspicious activity, auditing, and annual reporting

Make sure you’re compliant

Now that AML/CFT obligations apply to a broader range of organisations, more business owners need to adjust their processes and put systems in place to ensure compliance. Adhering to the rules isn’t just a legal requirement, it’s also an important way to prevent criminal activity – and protect your business reputation. 

Working with First AML will ensure you’re meeting your requirements, without pouring additional time and resources into this specialised area of compliance. Talk to our team today to find out more.

About First AML

First AML is an AML technology provider, and the maker of Source, an all-in-one AML platform. Source powers thousands of compliance experts around the globe to reduce the time and cost burden of complex and international entity KYC. Its enterprise-wide, long term approach to the KYC / CDD data lifecycle addresses time and cost challenges while minimising compliance, reputational and security risks.

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