New Zealand Charts Ambitious Overhaul of AML/CFT Regime with Risk-Based Reforms and Global Alignment

The New Zealand government has announced a wide-reaching series of proposals aimed at reshaping the country’s anti-money laundering and countering the financing of terrorism (AML/CFT) regime. Tabled by the Associate Minister of Justice, the reforms are designed to strengthen law enforcement’s ability to combat serious financial crime while easing compliance burdens for legitimate, low-risk businesses. While not yet law, the proposals signal a major shift in New Zealand’s regulatory posture and reflect the growing global emphasis on intelligence-led, risk-based approaches to financial crime prevention.

These proposed reforms are the result of an extensive domestic review process, international peer assessments, and consistent engagement with the country’s regulated sector. The intent is to bolster New Zealand’s reputation as a safe and credible place for international business, while closing off existing gaps that allow illicit funds to move undetected. The announcement marks a pivotal moment for the country’s AML framework, and its implications will resonate across New Zealand’s financial services landscape and the broader global compliance community.

At the core of the reforms is a new bill that would significantly enhance the powers of Police, financial supervisors, and the Financial Intelligence Unit (FIU) to disrupt and dismantle organised criminal networks. A centrepiece of the proposal is a cap of NZ$5,000 per international cash transfer—a threshold designed to curb large-scale structuring and smuggling schemes commonly used by criminal groups seeking to move funds outside the regulated banking system. This mirrors recommendations from the Financial Action Task Force (FATF), which sets international standards for financial crime monitoring.

The government also proposes a nationwide ban on cryptocurrency ATMs. These devices, which have raised red flags internationally due to the anonymity they offer, are seen as a key vulnerability in the fight against money laundering involving digital assets. By eliminating crypto ATMs, authorities aim to sever a significant conduit for converting illicit cash into trace-resistant virtual currency.

Another major reform would expand the FIU’s authority to compel banks and other reporting entities to provide not only static account information but also real-time streams of financial data. This includes transaction records, behavioural patterns, and contextual financial information for individuals under investigation. The change is intended to empower the FIU to respond more dynamically to evolving threats and improve cross-border data sharing with international intelligence counterparts.

Further proposals include the creation of a dedicated financial sanctions supervisory regime. This new framework would enhance monitoring and enforcement of both domestic and international sanctions obligations, aligning New Zealand with FATF recommendations and its duties under the United Nations Security Council. The initiative addresses gaps noted in recent evaluations and aims to create a clearer, more enforceable regime around financial sanctions compliance.

To sustainably fund the reformed AML/CFT system, the government has proposed a risk-based levy on reporting entities. This would provide financial stability for supervision and enforcement efforts, with costs distributed proportionally based on the risk profile of each sector. While still in consultation, this funding mechanism is positioned as a way to ensure continuous improvement of the system without overburdening lower-risk industries.

While the overarching aim of these reforms is to combat serious criminal activity, the government has equally stressed its intention to ease unnecessary compliance requirements for low-risk entities. Through two existing legislative pathways—the Statutes Amendment Bill and the AML/CFT Amendment Bill—relief is already underway for businesses managing low-risk clientele. One such amendment would remove the obligation for firms to verify the residential addresses of many low-risk clients, a move widely welcomed by industry stakeholders who argue this step adds little value in managing risk.

Additionally, simplified due diligence requirements are proposed for certain trust structures deemed to present minimal risk, such as some family and charitable trusts. By allowing compliance teams to focus their attention on higher-risk, more complex entities, the reforms aim to eliminate inefficient box-ticking exercises and replace them with targeted, intelligence-based practices.

These changes are closely aligned with FATF’s global shift toward risk-sensitive regulation. New Zealand’s most recent mutual evaluation report from the FATF commended the country’s progress but also highlighted persistent gaps in enforcement and supervision. The current proposals seek to close those gaps while ensuring the system remains fit for purpose in the face of rapidly evolving criminal methodologies.

International developments also factor heavily into the rationale for reform. Other advanced economies such as Australia, Singapore, and EU member states have recently updated their AML regimes, boosting supervisory powers and strengthening the role of financial intelligence units. New Zealand’s package of reforms positions it alongside these jurisdictions, reinforcing the country's commitment to global compliance standards.

If implemented, the proposed changes would reshape compliance obligations for thousands of entities under the AML/CFT Act 2009, including financial institutions, law firms, real estate agents, and accounting professionals. Immediate outcomes would include a stronger focus on higher-risk transactions and customers, and greater clarity around compliance expectations. The NZ$5,000 transaction cap and the removal of address verification for low-risk accounts are expected to reduce regulatory ambiguity and simplify risk assessments.

Despite the deregulatory elements, firms should not expect leniency for failings. On the contrary, the reform signals a tougher enforcement environment, with increased penalties and heightened scrutiny. Senior leadership and compliance officers will need to remain vigilant and prepare for a regulatory framework that rewards proactive risk management and punishes negligence.

The government has emphasized that consultation will be a central feature of the reform process. Businesses and AML professionals are encouraged to provide input on issues such as how the sector levy should be structured, the operational implementation of cash transfer caps and crypto ATM bans, the scope of simplified due diligence, and the governance of the new financial sanctions regime. This collaborative approach underscores a broader trend toward co-regulation and acknowledges that effective AML enforcement requires input from both regulators and industry.

From a reputational standpoint, the reforms are poised to boost New Zealand’s standing as a low-risk jurisdiction for international finance. Stronger alignment with FATF benchmarks and robust enforcement mechanisms could lower the country’s risk profile in global assessments and foster confidence among correspondent banks and international partners.

Nevertheless, the financial crime landscape remains highly dynamic. Criminal networks are constantly adapting, leveraging new technologies and exploiting cross-border loopholes. The true measure of the proposed reforms will be their flexibility and responsiveness to future threats. With an adaptive regulatory architecture and active industry engagement, New Zealand aims to keep its AML/CFT regime ahead of the curve.

In conclusion, New Zealand’s AML/CFT reform proposals represent a bold step toward a smarter, more targeted approach to financial regulation. By strengthening law enforcement powers, enhancing intelligence capabilities, and reducing compliance friction where risks are low, the government is setting a new standard for regulatory effectiveness. Though still subject to consultation and legislative review, the proposals provide a clear roadmap for the future. For financial institutions, compliance professionals, and policymakers, the message is clear: prepare for a new era of risk-based regulation where legitimate business thrives—and financial crime has fewer places to hide.

By fLEXI tEAM