But court judgments have interpreted the charge to mean the Crown must not only prove the alleged launderer converted assets from one form to another, but did so with the "very purpose" of "concealing" the property.
A consequence of that ruling is that underworld figures have been acquitted of money laundering despite disposing of millions of dollars of cash or assets derived from serious crime such as drug dealing.
The wording of the money-laundering offence also means New Zealand has not met international obligations under two United Nations' conventions to fight organised crime and led to criticism by the Financial Action Task Force.
High-level talks between ministry officials and law enforcement agencies has led to Ms Collins signing off to change the money laundering charge as part of the Organised Crime and Anti-Corruption Bill.
The amendment will remove the "intent to conceal" element of the money laundering offence as well as the requirement that the crime from which profits are derived must be punishable by five years or more imprisonment.
The changes should lead to a better conviction rate for money laundering prosecutions.
Of the 1643 prosecutions since 1996, just 415 have led to convictions - a success rate of 25 per cent.
And the problem is much larger than that, according to police.
A national risk assessment on money laundering and terrorism financing revealed there were 77,648 "predicate" offences, such as drug dealing, that had the potential for associated money laundering charges to be laid in 2009.
Of those offences, just 0.2 per cent were prosecuted.
There was not enough specialist expertise to investigate complex money laundering and because there were so few investigations, the experience was difficult to develop according to the Cabinet papers.
Intelligence reports developed by the police based on suspicious transaction reports were "under-utilised" because there were many more targets than investigative resources.
Instead, law enforcement agencies have used the evidence of big spending - such as an unemployed person spending large amounts of money at the casino - to prove serious criminal offending, such as drug supply, rather than charge them with money laundering.
More than $100 million of suspected criminal assets have been restrained to await a court hearing, under the Criminal Proceeds Recovery Act.
The change to the money laundering offence will dovetail with the Anti-Money Laundering and Countering Financing of Terrorism Act which comes into effect at the end of this month.
The law places the onus on banks, other financial institutions and casinos to gather identification about their clients, identify risk and report suspicious transactions.
Big money
* 1643 prosecutions for money laundering since 1996
* 415 have led to convictions
* 77,648 offences in 2009, such as drug dealing, had the potential for associated money laundering charges.