Costs and benefits of AML/CFT laws

Over the coming years, more businesses and professions will have to put measures in place to help tackle money laundering. There will be compliance costs but also widespread benefits.

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The Government is proposing to extend the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act to real estate agents and conveyancers; many lawyers and accountants; some high value dealers; and betting on sports and racing.

In essence, businesses and professionals affected by Phase 2 of the Act will have to put in place systems and processes to deter criminals from trying to exploit them, and to report suspicious transactions and activities to law enforcement agencies.

What are the costs?

It’s too early to say what the costs to businesses will be once the Act is extended.

Initial estimates suggested the maximum cost could be $1.6 billion over 10 years if most Phase 2 businesses had to comply with the current Act.

Since that initial research was done, the Government has taken steps to minimise compliance costs and provide options to further reduce and eliminate red tape. For more details, go to How can I reduce my compliance costs? below.

For information about how the costs and benefits were estimated, see:

AML/CFT Phase 2 costs and benefits reports

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What are the benefits?

Effective AML/CFT measures help stop criminals laundering the proceeds of fraud, drugs, tax evasion and other crimes through legitimate New Zealand businesses. They also make it easier for authorities to trace the proceeds of crime, prosecute offenders and seize illegally earned money and assets.

Over a 10 year period, the estimated benefits include disrupting about $1.7 billion of illegal drugs and fraud crime.

Estimates also suggest it may prevent up to $5 billion in broader criminal activity (for example, because offenders will have less money to reinvest into illegal ventures or will be deterred from committing crime) and reduce about $800 million in social harm related to the illegal drug trade.

For information about how the costs and benefits were estimated, see:

AML/CFT Phase 2 costs and benefits reports

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How much will it cost me?

Costs will vary between businesses and sectors, and will depend on things like:

  • the kinds of services you provide
  • money laundering risks in your sector
  • the size of your business
  • the number and type of customers you have, and
  • the volume and types of transactions you carry out.

For more details about your potential obligations, see the information specific to your sector at:

Tacking money laundering and terrorist financing

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How can I reduce my compliance costs?

You may be able to share compliance costs with related businesses (for example, if you’re a subsidiary or part of a franchise), or outsource customer due diligence tasks to others who can do it more cost effectively. For more information, see:

Working with others to reduce your AML/CFT compliance costs

Further ways to reduce compliance costs are outlined in the exposure draft of the AML/CFT Amendment Bill. You can read the draft Bill and provide feedback on it at:

Phase 2 AML/CFT exposure draft amendment Bill

Also, the government agencies involved in the AML/CFT regime can help you keep compliance costs down by giving you guidance, information and support. For more information, go to:

AML/CFT supervision and support for businesses

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