Sitting date: 13 February 2025

ANTI-MONEY LAUNDERING AND COUNTERING FINANCING OF TERRORISM AMENDMENT BILL

First Reading

Hon NICOLE McKEE (Associate Minister of Justice): I present a legislative statement on the Anti-Money Laundering and Countering Financing of Terrorism Amendment Bill.

DEPUTY SPEAKER: That legislative statement is published under the authority of the House and can be found on the Parliament website.

Hon NICOLE McKEE: I move, That the Anti-Money Laundering and Countering Financing of Terrorism Amendment Bill be now read a first time. I nominate the Justice Committee to consider the bill.

I have heard from many New Zealanders that the current regulatory regime for anti-money laundering and countering financing of terrorism (AMLCFT) is overly burdensome and, in some places, confusing for businesses trying to meet their obligations. The bill is one step towards delivering regulatory relief to people in New Zealand and removing the red tape that is holding productivity in this country back.

It was prepared alongside the justice regulatory systems amendment bill package, which should soon have its first reading. This means that the amendments this bill contains are focused on addressing legislative gaps and ambiguity, removing unnecessary red tape, and making continuous improvements to justice regulatory systems. This bill makes 26 amendments that will improve the effectiveness, the efficiency, and consistency of the anti-money laundering regulatory regime for the benefit of Kiwi businesses; support the better functioning of the responsible agencies; and improve New Zealand's compliance with international standards. This is important to help us maintain our international reputation in our next financial action taskforce assessment in 2029 and to ensure smooth access for New Zealand's businesses to the international financial system.

The Government is introducing these changes following a financial action taskforce evaluation of our anti-money laundering regime and a subsequent review of the Anti-money Laundering and Countering Financing of Terrorism Act. This is one part of a broader work programme being progressed by the Ministry of Justice, which will build on these amendments and further improve the effectiveness and the efficiency of the AMLCFT regime. These changes include a new single-supervisor model, the introduction of a levy, and a wider regulatory package of reforms.

This bill responds to the conclusions of this review of the Act. For example, it reduces unnecessary compliance costs to businesses through amendments that clarify existing obligations and terminology, making the Act easier to understand and easier to apply in the real world. These changes address key difficulties for many low-risk businesses who are currently required to undertake onerous checks even when there is clearly very little risk. These are part of the Government's plan to make the AMLCFT system work better, with less overly prescriptive requirements, by allowing businesses to take measures in line with the actual risks that they face. This bill will support that change in approach by clarifying the statutes of guidance on risk so that businesses are equipped to make the call on the level of risk involved.

I won't go through each amendment one by one, but I would like to highlight some specific changes that will clarify obligations and offer some relief for New Zealand businesses. Firstly, we are relaxing the requirements for businesses to conduct customer due diligence for low-risk trusts. Trusts can be vulnerable to being used for money laundering and terrorist financing, but in New Zealand, there are a large number of trusts that present a low risk, such as many small family trusts. Currently, businesses must apply the same enhanced customer due-diligence requirements to all trusts, regardless of the risk, costing them unnecessary time and money. This bill will allow for the application of standard customer due-diligence measures for low-risk trusts that are more proportionate to the risks that they represent.

Another amendment in this bill is the removal of the requirement for people to submit a border cash report if they have received cash from someone who physically moved the cash into New Zealand. This requirement is nonsensical, considering that the person bringing in the accompanied cash must also complete a border cash report. This duplication is unnecessary, and that is why this Government is going to get rid of it.

These changes and others will support a better functioning anti-money laundering regime. They are also part of a wider work programme to improve the regime and will support delivering on this Government's promise to install confidence in Kiwi businesses to meet their money-laundering obligations whilst helping to rebuild a thriving economy. I commend this bill to the House.

DEPUTY SPEAKER: The question is that the motion be agreed to.

Hon GINNY ANDERSEN (Labour): Thank you very much, Madam Speaker. I rise today to speak in support of the Anti-Money Laundering and Countering Financing of Terrorism Amendment Bill. Many of the initial changes for anti - money-laundering (AML) came through under the previous John Key National Government, and I remember working on those and identifying where the weaknesses were in the New Zealand system in order to make some of the changes that closed loops and made it harder for organised criminal groups to exploit New Zealand as a way of cleaning dirty money.

So there's some key areas that we need to be aware of that New Zealand is vulnerable to. Shell companies have well known that New Zealand is an easy place to set up a shell company—a relatively easy company registration has been exploited by criminals in the past. The other area that we've seen, from my experience, is also real estate. When foreign buyers were able to purchase properties in New Zealand, we saw substantial residential homes being purchased for cash and kept empty for a number of years, and then on-sold. So with the reconsidering of opening up our property market to foreign buyers, we need to also be vigilant that we're not opening up opportunities for New Zealand to be exploited.

We support the legislation and we support the slight relaxing of some of the areas in here, but we do err with a word of caution in terms of what we're facing globally now. In the past year—roughly a year, year and a half—we have seen an exponential increase in the prevalence of methamphetamine in our waste-water testing. We have the highest levels of meth coming into New Zealand that we have ever seen before. That methamphetamine is sold, and that money must be cleaned, and so we need to be watching where organised criminal groups are taking the profits from the record levels of methamphetamine in New Zealand, and how they are cleaning that. So it's good that we're making it easier and going for productivity and all that, but, at the same time, what's the point of taking a gang patch off someone if you're enabling them to pedal meth and clean that money in a dirty business?

In terms of the main changes that this bill does, it relaxes the customer due diligence requirements for low-risk customers, and it's important that we understand exactly how we are establishing those criteria for what is a low-risk customer, because one of the many ways that criminal operatives do work is that they specifically identify "cleanskins", or someone without a previous criminal record, to be able to use that individual to complete a transaction to launder money, and police are well aware of those behaviours.

In saying that, in terms of identifying cleanskins, I should acknowledge that police do an amazing job through forensic accounting of following the money through putting through complicated systems of how money has passed through various different back accounts, structures, many of them offshore, and having to work with international counterparts to identify where that money is coming from and how New Zealand is being utilised in those international networks. We don't want to be seen as a soft touch in the South Pacific. We want to have a reputation for being a good place to do business, and part of that is having integrity and things like our company structures, like our real estate purchases, and those other institutions that we rely on.

This legislation also modifies the definition of a trust and a company service provider. It enables a risk-based approach for identifying politically exposed persons, and it clarifies businesses' obligations under the Act. The reason why we do support the bill is that we've heard from businesses and organisations that the AML countering financing of terrorism (CFT) compliance has been onerous to some, and that time frames can be prohibitive. So I understand there are some changes, particularly, around the number of days to make it a bit easier for doing business. We know that we need an AML CFT programme that works effectively, and it shouldn't be cumbersome. It needs to be operating well. But we want to make sure that it's still protecting us and protecting our international reputation and integrity. We know we've taken a hit in terms of those rankings recently; we don't want to see that happen again. It's important that you submit at select committee if you have views on this bill. We want to be able to consider those all rigorously over that period. I commend it to the House.

Dr LAWRENCE XU-NAN (Green): Thank you, Madam Speaker. I also rise on behalf of the Green Party of Aotearoa New Zealand in support of the Anti-Money Laundering and Countering Financing of Terrorism Amendment Bill. I think the previous two speakers have mentioned some of the context behind this. The last big update of this particular Act was in 2017, and since then two major assessments have been completed, one of them by the Financial Action Task Force in 2019-21 as part of some of our agreements and obligations under the mutual evaluation of New Zealand. But also, most recently, we have seen the statutory review of the Anti-Money Laundering and Countering Financing of Terrorism Amendment Act, which was concluded in 2022, ergo we come to the bill today.

I think the previous speakers have also mentioned some of the areas, in terms of the amendments that are made by the bill. I think the key here that is particularly pertinent as part of the review, and particularly when it comes to the statutory review in 2022, is around having a flexible, risk-based approach to the way that we look at this. I think the previous two speakers have already mentioned a number of instances, such as trusts, such as smaller businesses, that potentially have had the same level of scrutiny and the same level of administrative and compliance burden being placed on them. I think it is important to have that level of risk-based approach.

A couple of things I would like to mention in addition: the first one is the fact that I will be interested, as we're going through the select committee process, in why certain parts and certain recommendations that were conducted by the statutory review weren't included as part of this amendment bill, and I think some of them may possibly be incorporated into this. The other thing that I've noticed in particular, in terms of the amendment that is being presented in front of us, although it's good and some of these are needed, is it's still very much focused from the perspective of businesses—just to say that, in terms of my personal dealing with this Act previously, working in international education and helping international students, an incredible burden has been placed on international students when opening a bank account in the first place as a result of this Act. And the burden has been placed around, in particular, the proof of address process, which I'm sure maybe some of the submitters would be submitting on.

I am also interested, as part of the process, as we're going through select committee, about whether we can look at elements that go beyond what is going to be beneficial and provide that support for businesses as well as providing things sometimes on an individual level, and particularly as we see that this Government is also interested in drawing in more international students. One of the biggest barriers we see for international students when they first come here is that initial barrier of setting up their new life here in Aotearoa New Zealand and all of the elements of manaakitanga that's supposed to come along with that. And part of that, like I mentioned, is around this bill and the impact it has to open a bank account.

The last thing I want to mention—that, again, I would like to have seen included as part of this bill, and this was mentioned specifically in the statutory review—is around sanctions obligations, and particularly when looking at financial sanctions to combat terrorism funding and financing. Now, we have seen previously, in the past, that we are looking at sanctions, particularly for countries and areas that have contributed to warfare and to genocide, in the case of the Russia-Ukraine war. But I'm also interested, in terms of when we're looking at this bill, in the role that this bill plays in the ongoing support and ongoing support for domestic businesses in carrying and managing that risk and understanding the material risk of sanctions obligations, and particularly in areas such as what we're seeing with the Israel-Palestine conflict as well.

So, over all, the Green Party does support this bill and we are looking forward to submissions and people who understand the ins and outs of Anti-Money Laundering and Countering Financing of Terrorism Amendment Act, as part of the select committee process, but, like I said, there is definitely a few things that the Green Party will be keeping a very close eye on as part of that select committee process. Thank you.

TOM RUTHERFORD (National—Bay of Plenty): Thank you very much, Madam Speaker. As a relatively new member of the Justice Committee, it's exciting to see—

Hon Andrew Bayly: A valuable member.

TOM RUTHERFORD: A valuable member, Mr Bayly. It is great to see new legislation coming to the really hard-working committee, which had plenty over the last 13, 14 months. The workload just keeps ramping up. This is actually really fundamentally vital. Members who have spoken previously, the Minister who was introducing the legislation, and then Labour and the Greens both have thrown their support behind the bill—it's really positive to see.

It's about updating our legislation, particularly around anti - money-laundering and countering the financing of terrorism, to ensure that New Zealand is where it needs to be in 2025 and moving forward. It's critical for safeguarding the financial system and protecting our communities here in New Zealand. These amendments that we're making through the legislation—and I'm looking forward to seeing what the submissions are from those out in the general public. I would welcome your submissions to the Justice Committee. There's many out there who will be subject-matter experts on this topic. But we've proposed some amendments that are based on extensive reviews and international assessments to ensure continuous improvement. Therefore, I commend it to the House and look forward to hearing the submissions to the Justice Committee.

JAMIE ARBUCKLE (NZ First): Thank you, Madam Speaker. I rise on behalf of New Zealand First to support this first reading of the Anti-Money Laundering and Countering Financing of Terrorism Amendment Bill. It's a mouthful, just the title of this, also known as the AML/CFT for short. Like our previous speaker, I support the bill to the select committee. I think the submissions that are received on the bill will be something that the committee will be informed of. There are a number of aspects that I'll talk about shortly that are quite a surprise of what's actually happening or can actually happen through the border.

So this bill amends the Anti-Money Laundering and Countering Financing of Terrorism Act 2009, and that's the principal Act, to strengthen New Zealand's regime against financial crimes. This amendment bill responds to two pieces of work that we've already heard about from other members—the Financial Action Task Force that was held between 2019 and 2021, and, secondly, it's a statutory review of the original Act that is the 2009 Act. The intention of this bill is to clarify the obligations, reduce compliance costs, enhance enforcements, and align with international standards. Those international standards are something that we need to make sure are at the correct settings.

Criminal and terrorist networks are evolving, as we know, and previous members have talked about that. They are also using stored-value items. I must say, reading through this legislation, people in the general public probably do not realise things like casino chips, pre-paid vouchers, and, obviously, now gold being of such a high value—and also our Minister Shane Jones getting the mining industry going, obviously the gold is getting more and more valuable—but those casino chips, in particular, and pre-paid vouchers, it was something that kind of just stunned me a little bit how people try to get around those logical things through the border, probably passport and cash, where now it's people try to find other ways, the grey, dark areas, of actually avoiding the transaction of cash, but if you can bring in a voucher or those casino chips, it's a way of getting past the system.

So in the clauses here, 17 and 21, it's around the cash reporting. So I think that's something for the committee. Around those stored-value instruments, that will be very, very helpful to get more information on. This legislation will, obviously, modernise our regime to keep pace with the international standards while protecting our economy and our community.

There are numerous reasons why New Zealand First supports this bill. It, obviously, closes those loopholes that I've just discussed—especially around our border areas. It strengthens enforcement. Obviously, at the moment, there's a lot of paperwork happening, but it's actually the enforcement that we want to strengthen. It protects taxpayers and businesses, and it is our businesses that do suffer, especially in the cases that we're talking about, the vouchers and those casino chips. It upholds our global reputation and futureproofs our laws. So New Zealand First is committed to putting New Zealand and New Zealanders first, as we know, and we will support all common-sense policies which do the same. So I commend this bill to the House.

CARL BATES (National—Whanganui): Thank you, Madam Speaker. New Zealanders are sick of the anti-money laundering requirements that just go too far. Everyone appreciates the need for ensuring that New Zealand meets the requirements of our international standards, and this bill will ensure that we continue to do that. But it also recognises that we just need to wind the clock back a little bit, make it more practical for Kiwis, for businesses, for small businesses, to get on and do the things that actually create wealth in this country, that drive productivity, and make this country tick. I commend this bill to the House.

INGRID LEARY (Labour—Taieri): This week, New Zealand lost its coveted first place, not in a sporting event but actually in the in the Transparency International Corruption Perceptions Index, and we dropped from first to fourth. There were some really surprising remarks, actually, from the Acting Prime Minister, Winston Peters, saying he thought we didn't actually deserve the first place in the first place, which I found quite astounding. But we're really keen to get back up to first place, and this legislation will go a little way towards doing that.

I would temper my remarks, though, by also referring to remarks made by the Transparency International New Zealand chair Anne Tolley, who said that to really safeguard our interests from this kind of terrorism and money-laundering threat, we need to do three big things. The first is a public register of beneficial ownership. That's important because, as I'll come to later in my contribution, the beneficial ownership has been clarified as being a target of the bill. But, without a public register, I am wondering about whether that will be achievable.

She also mentioned the financial transparency of political parties. Now, that is top of mind for a lot of people at the moment with some of the shenanigans we're seeing around this place and with some of the legislation, including things like the fast-track bill. So we would welcome, I think, financial transparency of political parties, and I do see that as part of the broader framework that's needed.

The last one is transparency around lobbying, and we have also seen some debate in this place over the last two parliamentary terms when it comes to the revolving door of lobbyists. Certainly, we've seen that this parliamentary term with questions of the influence of big tobacco on current legislation.

So that is the framework that Anne Tolley suggests, and this transparency bill, the Anti-Money Laundering and Countering Financing of Terrorism Amendment Bill, would go some way towards doing that. When I look at the bill itself, it is something of an omnibus bill. It mainly looks at the primary legislation, but it does have some input into regulatory systems, courts, tribunals, and occupational regulations.

A bit of a summary: I have mentioned the controlling interests, and really what the bill is trying to do is to look at the controlling interests and to target those who control these nefarious activities, rather than the middle people. The bill does go some way to doing that, but it also looks at the beneficial parties—so those who directly benefit from the activities. I think that's good in terms of achieving the bill's objectives, which are around efficiency and effectiveness. Often when we look at efficiency and effectiveness, they seem to have a tension between them, but in this case, I think it is really about targeting, and the bill does seem to go some way to do that.

The last thing I'd like to mention is just the politically exposed person, because when we're looking at beneficial owners—and I've mentioned that the benefit doesn't necessarily flow through under this Act—companies and organisations are not caught, which I query, but the beneficial owners could be politically exposed persons. I just wanted to contribute a little bit about what that might mean, because there is a common understanding in the financial world about who politically exposed people are. It doesn't mean that they're involved in nefarious activity, but it does mean that they could be regarded as being of higher risk, and so, therefore, there is now a duty of care on handling those interests to make sure that they have a proportionate framework.

I think the flexibility in the legislation seems to do that really well, because there will be different politically exposed people with different levels of risk attached to them. They are considered higher risk because of their conspicuous position or because of the connections that they have globally. The Financial Action Task Force in New Zealand defines them as including people like Government officials, senior executives, relatives of those people, and, of course, politicians.

So my final contribution, really, is from my experience in Fiji where there was money laundering. There's a report from 2016 from Transparency International that talks about how most of it relates to narcotics. We don't want to see that happen in New Zealand. Ginny Andersen has also mentioned that we are starting to see some of the corrupt big business in New Zealand with drugs and narcotics getting involved in money laundering. This bill will go some way to protecting us and some way to helping us get back to our number one spot on the index.

Dr VANESSA WEENINK (National—Banks Peninsula): Thank you, Madam Speaker. It's an honour to rise and speak in this debate on this bill, the Anti-Money Laundering and Countering Financing of Terrorism Amendment Bill. Anti-money laundering should be something that we all agree is a bad thing. Money laundering is a bad thing. Yes, we all know that.

Hon James Meager: Money laundering: bad.

Dr VANESSA WEENINK: Money laundering: bad.

Hon James Meager: Yeah, terrible.

Dr VANESSA WEENINK: Yes, it's a terrible thing. But in doing this process of making it harder for money laundering and for crime, we've made it harder for businesses, we've made it harder for everyday New Zealanders just to get a loan, just to get a mortgage—

Suze Redmayne: Try being a farmer.

Dr VANESSA WEENINK: Yes, for farmers, it's absolutely painful. Try being a director of a company. Try being someone who has tried to buy a property through a trust. Any of these things are absolutely tedious. Changing this and making it simpler for business is one more thing we're doing to make it simpler for business, one more way we're getting rid of red tape, and I commend the bill to the House.

GLEN BENNETT (Labour): Kia ora, Madam Speaker. We make laws in this Parliament to protect people.

Carl Bates: Good start.

GLEN BENNETT: Yep. Do you want me to carry on? We make these—[Interruption]

DEPUTY SPEAKER: Please carry on.

GLEN BENNETT: We make laws to protect people, to protect our communities, and to protect our businesses, and I believe that red tape is important. But as was just said by the previous speaker, Dr Vanessa Weenink, at times we need to consider that. The good thing about doing statutory reviews of legislation is that we can look; we can tweak; we can critique the different pieces of legislation that may have been around for a short time or may have been around for a long time. So it's good, as I read up and look at this piece of legislation, that work has been done over recent years to consider: is this stuff appropriate, is it an enabler, or does it slow things down? Does it actually provide the protections that it says it does, or is it actually just making things harder for some businesses and those who are wanting to look at different situations?

Now, as I looked and read, back in 2022, the statutory review began, and it's good to reflect and see that it is thorough and that we actually spend time. Often, from the outside of these walls, people think—and, again, I guess occasionally, some groups do slap random laws in. But there's a lot of work that's been done behind the scenes to reflect, to review, and to see what is working and what is not working. There's consultation; there's feedback asked for; and this bill, as it stands today, has had a thorough process long before it's made it into this House this afternoon.

The 26 proposals that are in this were looked at from the 2020 review, which was including internal and external connections and recommendations that were made. There were people like Crown Law Office, Department of Corrections, Department of Internal Affairs, Inland Revenue Department, Ministry of Defence, Ministry of Foreign Affairs and Trade, just to name a few. Then there was feedback, which we looked at as the work was done, in terms of where does this fit, is it working, is it not working, what are the barriers that were put in place? That's where we have feedback from people like the Chief Victims Advisor, like the Financial Markets Authority, like the New Zealand Police, and the Public Defence Service.

It's good when we can stand in this House and support a piece of legislation that has evidence behind it; when we support a piece of legislation that has gone through a process to say, "OK, we did some settings. We set some things up a number of years ago; those things, are they relevant today? Well, actually, there's some things we could do to simplify, to make it easier for the process." When it comes to anti - money-laundering, when it comes to countering financing of terrorism, there are some things that we can do. As the Minister who introduced this bill, the Hon Nicole McKee, said, there will be 26 changes that will be made, which have come from conversation, from consultation, and from reviewing where it's at.

Now, I look forward to this moving forward and going into the select committee process, because, as the Government—they love a good select committee, and, hopefully, they'll love a good, fulsome six-month select committee, where it takes its time and it goes through the process of allowing the public, allowing engagement from those who are at the front line of this. You look at people like sole-trader lawyers, sole-trader real estate agents. For them, we look forward to hearing their reflections on it, because some of the big businesses, they can suck up a lot of the work, the cost that goes in. But you think of some of those lawyers out in the provinces, some of those real estate agents out in the provinces who are just trading by themselves, and have said, "Look, there's just too much red tape in this piece of legislation. How can we actually make it work better for ourselves, which actually works better for our country?" Because that's the thing, with productivity.

This is law that we support, and we look forward to going to select committee, putting it out there for the people of New Zealand to continue to have their say—as they have since 2022, in terms of the review of this piece of legislation. Madam Speaker, on this side of the House, the Labour Party supports this bill.

Hon JAMES MEAGER (Minister for the South Island): Thank you, Madam Speaker. We're now talking about the Anti-Money Laundering and Countering Financing of Terrorism Amendment Bill , or AMLCFT, as it's known to my friends. We support this bill. The intention behind the Act, when it was first introduced a few years ago, was of course to prevent money-laundering. It has worked relatively well, but probably too well in some instances, and has caused some issues which have gummed up the system. Our job now is to un-gum it. The select committee will do its best to make sure that the bill gets thoroughly scrutinised and that the Act that comes out is well and truly un-gummed. I worked for a unnamed law firm, which—I hope I don't breach privilege; oh, well!—had to do anti - money-laundering on a very large Government department, and that doesn't make sense. Hopefully, sensible changes like this mean that we don't have to go through those absurd steps but we can still protect our country and our nation from things like terrorism and the activities that nefarious actors undertake with money-laundering. With that, I commend the bill to the House and look forward to its passage to the Justice Committee.

Bill read a first time.

DEPUTY SPEAKER: The question is, That the Anti-Money Laundering and Countering Financing of Terrorism Amendment Bill be considered by the Justice Committee.

Motion agreed to.

Bill referred to the Justice Committee.

© Scoop Media