Transitional compliance period for new AML/CFT nominee CDD obligations

Today, the Reserve Bank of New Zealand, the Department of Internal Affairs, and the Financial Markets Authority (together, the AML/CFT Supervisors), supported by the Ministry of Justice, released a statement providing a transitional compliance period (until 29 April 2022) for the new customer due diligence obligations in respect of nominee directors and nominee general partners.

The wider suite of amendments to the anti-money laundering and countering financing of terrorism (AML/CFT) regulations came into force today.  Our newsletter setting out those amendments in more detail can be found on our website.

Who needs to read it?  Why?

As we said in our earlier newsletter, this change to the AML/CFT regulations will be of interest to any reporting entities that have customers that are companies or limited partnerships.

Such reporting entities will likely need to update their policies, practices, risk assessments, and AML/CFT Compliance Programmes to reflect the new requirements around nominee directors and nominee general partners.

The provision of this transitional compliance period will give these entities more time to get these updates, and their systems generally, in order.

Our view

We support this transitional compliance period.  As we set out in our earlier newsletter, the nominee-related changes are significant.  A great many reporting entities are likely to have customers that will trigger these requirements, and updating their policies, practices, risk assessments, and AML/CFT Compliance Programmes to reflect the changes may be no small feat.

However, we understand this statement to simply be the AML/CFT Supervisors indicating that they intend to exercise their discretion not to pursue relevant noncompliance within that period.  It does not, and cannot, prevent reporting entities from technically being noncompliant during that time.  For instance, contractual obligations to disclose noncompliance would (depending on their specific terms) likely still be triggered.

Rather than having to rely on a statement such as this, particularly given the limited window between the 8 June 2021 promulgation of the regulation amendments and their coming into force today, we expect reporting entities would have felt more comfortable with a more extended period of notice and a formal transitional compliance period built into the amended regulations.

What next?

If you have any questions in relation to the amended AML/CFT regulations and how they may impact your business, or the AML/CFT regime more generally, please contact one of our experts.

Who can help