30 Sep 2021

FMA taking harder line on anti-money laundering rule breaches

11:56 am on 30 September 2021

The Financial Market Authority (FMA) plans to take a harder line on financial service providers compliance with anti-money laundering and counter terrorism financing rules (AML/CFT).

James Greig, Financial Markets Authority (FMA) Director of Supervision

FMA director of supervision James Greig. Photo: Supplied / FMA

The Authority has just published its AML/CFT Monitoring report which reviews its enforcement approach of the law over the past three years

The FMA had taken a stiffer approach to non-compliance over the period, issuing 27 private warnings, three public warnings and its first ever court proceedings against the derivatives issuer CLSA Premium NZ.

This compares with just one public warning and 17 private actions against firms between 2016 and 2018.

"New Zealand's AML/CFT regime has been in place for eight years and businesses have had plenty of time to comply with the regulations," FMA director of supervision James Greig said.

"Accordingly, we have now less tolerance for companies not meeting their obligations, which is reflected in an increased number of enforcement actions."

Greig said it was disappointing to find numerous cases where businesses were not meeting their basic requirements, particularly around having a robust AML/CFT programme in place, completing necessary audits or carrying out proper customer due diligence.

In the future, the FMA said, it would be carrying out more in-depth assessments of how firms add new customers, as well as monitoring of their accounts and transactions.

The report noted that the pandemic had resulted in the rapid adoption of retail trading platforms.

It said this increase had not resulted in AML/CFT processes being updated to effectively manage the risks on money laundering or terrorism financing.

"Reporting entities should review their risk assessments accordingly, to determine whether they need to adjust their risk ratings," it said.

Recently, the FMA put the trading application Sharesies on notice for failing to ask customers why they were using their platform and not verifying the identities of some customers with balances of more than $1000.

The authority is one of three supervisors under the AML/CFT Act, along with the Reserve Bank and the Department of Internal Affairs. Its role is to monitor and assess the level of non-compliance with the act across all FMA reporting entities.