Adviser "angst" over anti-money laundering rules
New anti-money laundering requirements will be a headache for advisers, and will provide no benefit to them or their clients, according to IFA president Nigel Tate.
Thursday, February 2nd 2012, 6:30AM 
2 Comments
by Niko Kloeten
The Financial Markets Authority recently issued guidance for advisers on how to comply with the Anti-Money Laundering and Countering Financing of Terrorism Act, which passed in 2009 and comes into effect next year.
Tate said the anti-money laundering requirements would cause some "angst" among financial advisers this year as they prepare for the new regime.
"It will become just one more thing that is compliance-based. It will benefit the government and their obligations more than clients or advisers.
"The obligation is on advisers to do risk assessment on their clients which is no mean feat if you have 300 to 400 investment clients.
"Then you've got to do it on your practice on the basis of your clients. That's an issue I think advisers will not be comfortable with but will have to do. The government is committed to it and we're not going to be able to change it so we just have to implement it."
Tate said the anti-money laundering requirements for advisers are similar to GST, where businesses have been effectively made agencies of the government in regard to its collection.
And he said unlike the Financial Advisers Act, advisers won't get any benefit from the anti-money laundering rules.
"It doesn't generate generate revenue or improve service or do anything for clients; there are no benefits for practitioners."
As an example of the extra compliance burden he said when advising on investments by trusts advisers would have to know not only all the trustees but also all the beneficiaries of the trusts.
However, he said clients were unlikely to have a problem with being asked by advisers where they got their money from.
"It's not bad information for advisers to know anyway - did they get it from selling a house, or was it from an inheritance? The more information we know about our clients and their situation and finances the better."
Niko Kloeten can be contacted at niko@goodreturns.co.nz
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Comments from our readers
It will increase costs and the industry will either, have to absorb these into their businesses, or pass the costs onto the client.
Cash payments I agree, should be vetted under the suspicious transaction reporting rules, as should seemingly frequent transactions in and out of various investments, but the vast majority of advisers should have no further onus on them to produce policies and audit trails, which are just there to satisfy some bureaucrat who has never had to run a real business.
I am not sure where we find the happy medium, but placing more burdens on an already heavily regulated industry helps no one, least of all the 'mum and dad' investors who are the lifeblood of the industry.
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