NEW ZEALAND Law and Practice Contributed by: Graeme Quigley, Ashton Goatley and Erin Hickey, Webb Henderson
submit annual reports to their AML supervisor. The issued AML Programme Guideline emphasises that: • senior management must approve and oversee the AML programme; • the board must ensure adequate resources are allocated to compliance; and • governance structures must support effective detection and mitigation of AML related risks. Independent review and audit of the risk assessment and AML Programmes is required by the AML Act. The AML Act provides for both civil and criminal enforcement. Directors may face personal civil liability (up to NZD200,000) where they knowingly permit AML failures or fail to ensure adequate oversight. Individu - als who knowingly or recklessly breach key obligations (including customer due diligence, record‑keeping or suspicious activity reporting) may also face fines of up to NZD300,000 and/or up to two years’ imprisonment. Recent case law suggests courts may adopt a stricter sentencing approach as the regime matures. Beyond the AML Act, failure to ensure AML compliance could constitute a breach of other directors’ duties – see 3.6 Legal Duties of Directors/Officers . 6. Audit, Risk and Internal Controls 6.1 External Auditors For details of when a company’s financial statements are required to be audited, refer to 5.1 Financial Reporting Requirements . If they are required to be audited, this must be done by a qualified auditor or audit firm, in accordance with applicable auditing and assurance standards. For that purpose, the company must appoint an auditor at its annual meeting to hold office until the close of the next annual meeting. The auditor is automatically reappointed at each subse - quent annual meeting unless they resign or cease to be qualified or the company passes a resolution to replace them. A director or employee of the company (or a partner or employee of any such person) may not be appointed or act as an auditor of the company. The directors must ensure that the auditor has access to the company’s accounting records at all times. The
auditor may require a director or employee of the com - pany to provide such information and explanations as the auditor thinks necessary for the performance of the auditor’s duties. The directors must also ensure that the auditor is allowed to attend any shareholder meeting, receives all notices and other communica - tions to shareholders regarding the meeting, and is permitted to speak at the meeting on any part of the business of the meeting that concerns the auditor. 6.2 Risk Management and Internal Controls New Zealand has implemented United Nations sanctions (under the United Nations Act 1946) and country-specific regimes like the Russia Sanctions Act 2022 (RSA), which impose legal restrictions on dealings with designated individuals, entities, goods, or countries. Like the AML regime, the RSA primar - ily relies on a risk based approach to compliance. Businesses are expected to understand and manage their own sanctions-related risks, and put measures in place to avoid breaches. As such, while there is no express duty on boards to oversee sanctions com - pliance, the duties discussed in 3.6 Legal Duties of Directors/Officers require boards, or committees (to the extent mandated to do so), to consider sanctions and geopolitical risks as components of an entity’s risk management and legal compliance framework. However, under the RSA, reporting entities under the AML Act are required to notify the Commissioner of Police where they suspect they hold assets, or are providing services, that are subject to sanctions. By implication (but not as a statutory duty) AML supervi - sors play a key role in monitoring and organisations compliance with the RSA.
7. Environmental, Social and Governance 7.1 ESG Requirements
In February 2024, the Supreme Court released its deci - sion in Smith v Fonterra & Ors (2024) NZSC 5, declin - ing to strike out a claim against a group of substantial New Zealand businesses. The claim was framed in terms of the existing recognised torts of public nui - sance and negligence, and a proposed novel tort of “climate system damage”. The Supreme Court held
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