How AML Audits Help Businesses Stay Compliant in NZ

In New Zealand, financial institutions and businesses operating in regulated sectors must comply with the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act). One of the key compliance requirements under this legislation is conducting an AML audit, which is an independent assessment of an organisation’s AML compliance programme and risk management framework.

An AML audit ensures that a business’s policies, procedures, and internal controls align with regulatory requirements, reducing the risk of financial crime. Businesses that fail to meet these compliance standards risk penalties, reputational damage, and operational inefficiencies. It is estimated that over $1 billion a year comes from drug dealing and fraud, and can be laundered through New Zealand businesses (https://www.justice.govt.nz/about/news-and-media/news/putting-the-heat-on-money-laundering/). This highlights the importance of AML compliance and the role of independent AML auditors in protecting businesses from regulatory risks.

What is an AML Audit?

An AML audit is an independent review of a reporting entity’s AML/CFT risk assessment and compliance programme. It assesses whether an organisation is effectively identifying and mitigating money laundering and terrorism financing risks. The AML auditor examines compliance frameworks and reporting obligations to ensure full regulatory adherence.

Key aspects of an AML audit include:

• Reviewing an organisation’s risk assessment to ensure it identifies and mitigates financial crime risks effectively

• Evaluating the AML/CFT programme, including customer due diligence (CDD), transaction monitoring, and record-keeping

• Assessing compliance with legislative changes and regulatory updates

• Examining staff vetting and training to ensure employees are appropriate for their role and understand their AML responsibilities

  
  

Since 2021, AML audits must be conducted at least once every three years (https://www.legislation.govt.nz/regulation/public/2021/0147/latest/LMS499139.html). However, supervisors such as the Financial Markets Authority (FMA), Reserve Bank of New Zealand (RBNZ), and DIA may require audits more frequently for higher-risk businesses. If you are unsure about your AML obligations, check out our AML FAQs to find answers to common compliance questions.

Why AML Audits are Important in NZ

AML audits are not just a legal requirement. They play a crucial role in strengthening financial integrity and preventing criminal activity. The Financial Action Task Force (FATF), an international body that assesses global AML/CFT frameworks, has stressed that independent reviews are key to ensuring AML/CFT measures remain effective (https://www.fatf-gafi.org/content/dam/fatf-gafi/mer/MER%20New%20Zealand%20ful.pdf.coredownload.pdf).

Strengthening Regulatory Compliance

Non-compliance with AML regulations can lead to severe penalties, reputational damage, and even criminal liability. The DIA has conducted targeted compliance assessments and found that many businesses fail to take remedial action after their AML audits (https://www.dia.govt.nz/AML-CFT-Targeted-Compliance-Assessments---Independent-Audit).

Enhancing Organisational Risk Management

AML audits provide a structured approach to managing financial crime risks. Money laundering tactics evolve rapidly, and businesses must regularly update their risk assessments.

The FMA’s 2021 AML/CFT monitoring report highlighted that:

• 34% percent of compliance breaches were due to poor implementation of AML programmes

• 19% were related to weaknesses in customer due diligence

  
  

The full report is available at https://www.fma.govt.nz/assets/Reports/AMLCFT-monitoring-report-2021.pdf. Regular audits help businesses identify and correct these gaps, making them less susceptible to financial crime.

Building Trust with Customers and Stakeholders

Customers, investors, and business partners expect transparency when dealing with financial services. A robust AML compliance framework, backed by regular independent audits, signals a company’s commitment to ethical business practices.

Common AML Audit Findings

During AML audits, common compliance deficiencies include:

• Outdated risk assessments that fail to reflect emerging financial crime risks

• Weak customer due diligence processes, with 19 percent of businesses failing to conduct proper client verification https://www.fma.govt.nz/assets/Reports/AMLCFT-monitoring-report-2021.pdf

• Failure to report suspicious transactions, limiting the effectiveness of the Financial Intelligence Unit (FIU)

• Poor record-keeping, making it difficult for regulators to conduct compliance checks

  
  

How Businesses Can Prepare for an AML Audit

To ensure a smooth AML audit, businesses should adopt best practices such as

• Updating risk assessments regularly to reflect evolving financial crime threats

• Maintaining accurate and accessible records for customer due diligence and enhanced due diligence

• Ensuring staff receive regular AML training, as compliance breaches often stem from lack of awareness

• Conducting internal AML reviews before the formal audit to identify potential weaknesses.

  
  

Once the internal review is complete, our AML audit services can conduct a thorough independent audit to ensure your compliance framework meets all regulatory requirements and aligns with current AML legislation.

Conclusion

AML audits are an essential tool for preventing financial crime and ensuring regulatory compliance. With financial regulators such as the DIA, FMA, and RBNZ intensifying enforcement actions, businesses must take AML audits seriously.

By addressing audit findings proactively and strengthening AML/CFT programmes, organisations can protect themselves from financial crime risks, regulatory penalties, and reputational damage.

If your business needs assistance with AML compliance, our team is here to help. Get in touch through our contact page for expert guidance and tailored solutions.