Muhammad Amjad recently published The “Low-Risk” Fallacy: Do the 2024-2026 AML/CFT Trust Exemptions Create a Structural Backdoor for Financial Crime?, 2026. Provided below is the abstract:
Let me start with a simple observation. New Zealand is about to make a big change to how it fights money laundering. The government wants to relax the rules for trusts that it calls “low-risk.” On the surface, that sounds reasonable. Why burden a family trust with the same heavy checks as a suspicious offshore shell company? But here’s the problem. The whole idea that any trust can safely be called “low-risk” is a fallacy. It’s a dangerous assumption that mistakes familiarity for safety. This paper digs into that assumption. I look at what the Financial Action Task Force actually requires, at what happened when New Zealand trusts were caught up in the 1MDB scandal and the Panama Papers, and at the largest GST fraud in this country’s history-which involved a family trust. What I find is worrying. The proposed amendments would remove verification of source of funds and source of wealth for “low-risk” trusts. Yet no one can clearly define what “low-risk” means. The FATF’s own guidance does not approve of such exemptions-it allows reduced checks, not zero checks. And the case evidence shows that trusts, including ordinary family trusts, are routinely used to hide criminal money and evade tax. I conclude that the government’s goal-reducing compliance costs for genuine families-is understandable. But the proposed solution creates a structural backdoor. Criminals will find it. New Zealand should think again.