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New software to weed out dodgy clients

Advisers will be able to check their clients against global money-laundering and terrorism watchlists at the click of a button, thanks to new software being brought to New Zealand.

Tuesday, November 6th 2012, 6:19AM

by Niko Kloeten

Australian IT firm Neurocom offers a software program called Membercheck, which allows advisers and other firms to scan their clients against watchlists compiled by Dow Jones featuring more than 600,000 names.

Under New Zealand’s anti-money laundering legislation, reporting entities including Authorised Financial Advisers are required to perform enhanced due diligence on overseas PEPs (politically exposed persons) including close relatives and associates of politicians. 

Enhanced due diligence includes having to find out the source of the funds being invested.  The law doesn’t require this for local PEPs.

However, getting access to lists compiled by the likes of Dow Jones can be difficult and prohibitively expensive for reporting entities at the bottom of the chain, according to Neurocom chief executive Ross Edenborough.

Australia has had its own anti-money laundering regime in place for five years and Edenborough said Membercheck was developed in response to demand from small-to-medium-sized reporting entities for a more cost-effective way to comply with their obligations.

“What we found when it came in to Australia was that the big banks had been doing this stuff for a long time… they take a feed from Dow Jones directly.

“For any reporting entity that has these requirements the only way to access a list is to buy one in some way and it’s typically very expensive… it can cost about $100,000 a year depending on the size of the company.”

Edenborough has been in New Zealand recently consulting with several adviser industry groups and recently spoke at the SIFA conference.

He said the pricing structure hadn’t been decided yet but indicated that for small AFA businesses it would likely cost about $500 a year “to go through a process where you know you won’t upset the FMA.”

Although many AFAs consider their clients to be low-risk, Edenborough said it can difficult to be sure without checking.    

“One of your AFAs mentioned Kim Dotcom and I’d never heard of him but we ran a check on him and it came up with all sorts… he had a very extensive profile.”

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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    “Just out of interest Mike - where would you suggest they go and work? Presumably just not in QFEs? In any capacity? It's...”
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    “Hi Mike, I think you are sharply understating the risks here of FMA directors and staff ultimately working for the banks...”
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    “Perhaps rather than reminding AFAs to get their house in order, the FMA would be better off spending that time finalising...”
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