AML warnings issued

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The Financial Markets Authority has issued a formal warning to NZX-accredited broker Tiger Brokers for not having adequate AML protection in place.

Monday, April 6th 2020, 1:26PM 1 Comment

James Greig

The regulator has also privately warned six other businesses for their anti-money laundering practises, mainly due to late auditing of their systems and controls.

In the FMA’s view, Tiger Brokers had failed to:

• adequately conduct enhanced and ongoing customer due diligence where required
• adequately verify relevant customer identification documents
• obtain adequate source of fund or wealth information relating to high risk customers, and take reasonable steps to verify that information
• report suspicious activity to the relevant authorities within three working days after forming a suspicion
• take reasonable steps to determine whether a customer or any beneficial owner, is a politically exposed person.

Tiger Brokers must prepare and submit a plan to the regulator before April 17, describing how and when it will amend the issues to become compliant. It must then complete these actions by September 30 or it will face enforcement action.

James Greig, head of supervision at the FMA said, “Warnings are an important regulatory tool for the FMA because they can force faster change than court proceedings. In these cases, formal warnings were the most proportionate response to the conduct by the firms in question. A public warning is designed to send a signal that we have issues with a company, and they need to address the concerns we have raised.

“The severity of Tiger Brokers’ likely breaches meant that a public warning was necessary, especially because it is a large business that is growing fast in New Zealand. The issues were wide ranging and weren’t minor or technical, meaning there was potential for immediate and ongoing damage to the integrity of our financial markets.

“The anti-money laundering legislation has been in effect for some time now, so we expect businesses to be aware of their obligations and why it is important to the integrity of New Zealand’s financial system.”

The FMA issued formal warnings to six other firms after finding:
• four failed to have their AML risk assessment and programme audited in a timely manner
• one failed to provide an audit of its AML risk assessment and programme
• one failed to have an AML programme in place, undertake a risk assessment, and designate an employee to administer and maintain the programme. This entity has undertaken remedial action due to the nature and extent of its breaches.

Greig said, “We decided not to name the other six businesses after considering the proportionate regulatory response. All of these firms in breach were either small businesses or individuals, and they are cooperating with the FMA and taking steps to become compliant.

“Many of the private warnings relate to independent audits of anti-money laundering systems. These audits are essential because they help to ensure businesses have robust systems and processes to detect and deter money laundering. A guidance document on the auditing of risk assessments was issued last year so there is now no excuse for non-compliance.”

The FMA conducts cyclical reviews of the roughly 800 entities it supervises for anti-money laundering. In 2019, the FMA analysed the AML audit reports of 49 businesses. The regulator also performs onsite monitoring visits.

Tags: AML compliance FMA

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