Trusts under the microscope: What the proposed AML changes mean for AMLCOs

For a country of our size, New Zealand has a remarkably high number of family trusts; estimated at between 300,000 to 500,000.

They’re a longstanding feature of Kiwi financial planning, commonly used to protect assets and provide for future generations.

But from a compliance perspective, trusts are rarely straightforward. Even a simple family trust can be time-consuming for reporting entities to assess, with incomplete documentation and limited visibility over beneficiaries often turning routine transactions into complex and resource-heavy reviews. And as recent cases have shown, even personal or family trusts can become vehicles for serious financial crime.

What has been proposed?

In a recent announcement, Minister of Justice Paul Goldsmith introduced a suite of reforms aimed at improving the efficiency of New Zealand’s AML regime. One of the key proposals is to allow simplified AML obligations for low-risk family trusts.

Under the current regulations, full customer due diligence (CDD) must be conducted on all trusts, regardless of complexity. This typically includes verification of:

• All trustees
• Settlors
• Beneficiaries (or classes of beneficiaries)
• Source of wealth and funds
• Any individuals with effective control or powers such as appointing or removing trustees

This level of scrutiny is designed to prevent criminals from hiding behind opaque legal arrangements. However, in practice, many of the family trusts encountered by reporting entities are relatively benign - set up for estate planning, with clearly defined family members and no links to offshore interests or complex structures.

The proposed change would allow for simplified due diligence on trusts that meet specific low-risk criteria, such as:

• All trustees and beneficiaries belong to the same family group
• The trust does not involve corporate trustees or offshore parties
• The trust holds limited assets and has straightforward activity

A typical example would be a family trust with the same two individuals as trustee, settlor, beneficiary, discretionary they have a local presence and only the New Zealand family home as an asset.

Why trusts remain a red flag

Trusts are still classified as inherently higher risk under FATF guidance because they are proven vehicles for:

• Concealing beneficial ownership
• Layering transactions to obscure illicit flows
• Inter-jurisdictional movement of funds through offshore or multi-SPV structures

Two recent New Zealand examples illustrate why AMLCOs must remain cautious:

Andrew Simpson and the Comancheros gang

Auckland businessman Andrew Simpson was convicted in 2022 of laundering millions for the Comancheros motorcycle gang, using a network of family trusts and lawyer trust accounts to move and disguise criminal proceeds.

Authorities highlighted that the trusts gave an appearance of legitimacy while obscuring true control, creating complexity for financial institutions performing CDD.

Du Val Group and the Clarke Trust

In 2024, the Financial Markets Authority (FMA) placed Du Val Group and ~70 associated entities under statutory management. A key concern was the opaque use of the Clarke family trust to execute inter-entity loans, “intellectual property” sales, and transfers through SPVs.

While no criminal money laundering conviction has been made, the layered trust/SPV structure and movement of funds through lawyer trust accounts linked to high-risk offshore parties created significant AML concerns.

Both cases underscore a critical lesson: a trust can appear legitimate on the surface while concealing significant risk beneath.

What does this mean for AMLCOs?

While the simplification proposal aims to reduce compliance costs and speed up onboarding, it introduces new responsibilities and possibly, new ambiguity.

1. Reassessing your risk framework and compliance programme

If simplified due diligence is permitted, compliance teams will need a clear, consistent way to define what “low risk” means. That goes beyond a checklist. Your risk framework must evolve to ensure that red flags like offshore beneficiaries, unusual asset structures, or connections to high-risk sectors are never missed.

The Simpson and Du Val cases show that both criminals and high-risk operators exploit ordinary-looking trust structures. A family trust that ticks most low-risk boxes could still mask hidden control or complex flows.

2. Documentation will still be key

A potential misconception is that simplified due diligence means cutting corners. It does not. The requirement to prove who is involved, where the money is from and why the structure exists remains unchanged.

Assuming the legislation passes and if your organisation adopts simplified processes, documenting your rationale for classifying a trust as low risk becomes even more critical. Regulators will expect:

• Clear logic for why a trust met the simplified criteria
• Evidence that risk factors were checked and ruled out
• A robust audit trail in case the trust is later linked to suspicious activity

In the Du Val example, PwC statutory managers noted the lack of clear documentation for intra-trust transfers, which contributed to regulatory intervention.

3. Internal training and controls must adapt

Where once the obligation was uniform (full CDD for all trusts), judgement now plays a larger role. Your staff need to:

• Recognise when a “simple” trust might be risky, e.g. linked to PEPs, SPVs, or unusual asset flows
• Know how and when to escalate
• Understand that lawyer trust accounts and personal family trusts can be used for layering

Practical case studies, such as the Comancheros trust network, can be powerful training examples to help staff identify patterns of misuse.

A moving target requires a flexible response

AML regulation is evolving, not just in New Zealand but globally. This is part of a broader trend where rules are becoming more dynamic, attempting to reduce unnecessary friction while still protecting the financial system.

For compliance professionals, the need for agility has never been greater. Tools and systems that were built around rigid rule sets may now struggle to accommodate these types of nuanced changes. A risk-based approach demands flexibility, the ability to adapt workflows, apply logic at scale and capture detailed audit trails without increasing manual effort.

As these proposals move forward, having an AML solution that can evolve alongside the legislation will be critical. Being able to update trust verification processes, apply new logic around low-risk criteria, and document decisions systematically will help ensure compliance while preserving operational efficiency.

What happens next?

The proposed bill had its first reading on 24 July and is open for consultation until 21 August 2025. As the rules evolve, AMLCOs should:

• Review and refresh your current approach to trusts
• Support teams to adopt a more judgement-based onboarding model
• Update internal guidance, templates and workflow logic
• Incorporate real-world case examples in staff training
• Ensure your technology and documentation can support judgement-based onboarding

Simplification can improve efficiency, but trusts remain under the microscope. Low-risk does not mean no-risk.