FMA ruling on AML overkill: PAA

Registered financial advisers offering class advice on KiwiSaver are reporting entities and must have AML processes in place, the FMA has said.

Tuesday, July 16th 2013, 6:46AM 4 Comments

by Susan Edmunds

The PAA had been expecting the regulator to exempt RFAs who were advising a small number of clients on KiwiSaver from the new AML legislation.

“To our surprise, the FMA have taken a firm view on this, and have now issued official clarification on this point. They are quite clear – if you are an RFA and have an agency agreement with a KiwiSaver provider, then you are a reporting entity under this Act.”

Advisers would need to set up AML processes immediately if they had not done so, the PAA said.

General manager Jenny Campbell said she would be raising her concerns with the FMA next week. “KiwiSaver is clearly a very low risk product from an AML perspective and this ruling is a clear case of regulatory overkill. As an association, we are very concerned that this places an unnecessary compliance burden on a handful of advisers, who represent a very low-risk sector.”

She said KiwiSaver advice was hard for consumers to get and the extra regulation would get in the way of their access to good quality advice.

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Comments from our readers

On 16 July 2013 at 7:10 am John Milner said:

Sorry Jenny but I wouldn't call class advice from an RFA good quality advice. Reducing standards because there isn't enough AFAs to cover everyone doesn't cut it with me.

On 16 July 2013 at 10:09 am Dirty Harry said:

Are there many RFAs who have agency agreements with KS providers? (Which KS providers are prepared to do that?)

That would be a very dangerous place for an adviser to be and the FMA has previously given guidance on it (hence their stance shouldn't really BE a surprise!). Anybody brave/stupid enough to think they can place KS without being AFA now has yet another thing to cause a re-think. If you are an RFA and have an agency agreement with a KiwiSaver provider, then you have much bigger things to think about than getting a picture of the client's passport!

Jenny: I don't know (not a member) if the PAA members have mandated their leadership to push back against everything the regulators do, but I doubt they have so how about working with them, and helping members to comply mmmkay?

On 16 July 2013 at 1:04 pm Land of the Long Red Tape said:

Whilst I agree that AML is overkill for KiwiSaver if RFAs are going to be allowed to not only sell KiwiSaver under the guise of "class advice" and then be exempt from AML then I would start to question the logic myself in being an AFA. I might as well become an RFA have way less paperwork, headaches and red tape and probably not having the FMA on my back every other week on some change to legislation. Then if I wanted to give a bit of investment advice I would just join a QFE. This industry is getting rather tiresome and I will be telling my children to get into compliance as that is where the money is these days more so than sales.

On 16 July 2013 at 1:08 pm Really? said:

Mike Pero mortgage brokers have KS agency agreements with (I think) Fidelity, many of these brokers are RFAs....

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