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Call for advisers to audit each other

Senior financial advisers should set up a system to audit each other for compliance with things such as the Anti-Money Laundering legislation, the Institute of Financial Advisers says.

Thursday, April 17th 2014, 6:00AM 3 Comments

by Susan Edmunds

The AML/CFT supervisors have published a user guide to the annual report that reporting entities will be required to fill in every year on their risk assessment and AML programme. The first report is due August 30.

The report covers things such as where the business is based, its risk assessment processes and details of its audits.

Providers are asked to estimate the number of transactions settled during the year, the number of customers they dealt with, the channels through which they found their customers and to provide details of mortgage lending, other finance arrangements, investments, and insurance.

IFA president Nigel Tate IFA president Nigel Tate said professional bodies were meeting the FMA today to discuss the requirements because many of the things requested in the AML report are duplicated in other reporting requirements. “We want to make it easy for people to comply.”

He said AML was an issue for advisers, particularly when it came to audits. “The regulations have spawned a huge marketplace of entities setting up compliance companies to run audits and it’s just adding to the burden for each of these advisers.”

Companies were charging anything from $500 to $2000 for an audit, which has to be done every two years. At the moment, the guidelines allow an independent person to perform an audit and says that reciprocal audit arrangements with a similar company should be considered.

Tate said when there was more information available about what was expected from an audit, he hoped to be able to set up a system where senior practitioners could do peer audits for a couple of hundred dollars.

He said it would provide industry learning opportunities for the advisers and the wider industry.

It would be a better option for advisers than paying a firm to do it, he said. “I could name half a dozen companies that have been established specifically to do this sort of work, it’s compliance for compliance’s sake.”

Tate said he was also lobbying for all of the reporting advisers have to do to be required at the same time each year. “Invariably, some will forget and miss the deadline. If they have to do it once a year and it’s in synch with their authorisation, it would be much simpler.”

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Comments from our readers

On 17 April 2014 at 9:02 am Gavin Austin ABCompliance said:
Surely a senior practitioner would value their time at more than a couple of hundred dollars. Even if it only took the AFA practitioner 3-4 hours to do the audit there is also the pre-audit time. 1-time to set up a reasonable audit process that will address all the requirements of the Act that need be audited, 2- the initial time required to obtain the skills and knowledge required for the task and 3 - the ongoing time to maintain the knowledge competence and skills required to perform the audit functions. All this "time" adds up and time is money in anyone's business. A discussion from the Australian Industry resolved that practitioners there should be valuing their time at $300 per hour.

So whilst it sounds like a good idea why would AFA senior practitioners bother? Surely the time would be better spent on their business making it more efficient or gaining more business so that the external costs of compliance from specialist professionals will become affordable.
On 17 April 2014 at 1:22 pm Lyall Daines said:
Thank you Nigel for going into Bat once again for us. I am an AFA specializing in the Family Market, therefore mostly Presenting/Promoting and Servicing selling Kiwi Saver to my Clients in my Data Base. I have Completed The Risk profile and have come out on the AML risk as very Low. To come to the point, I have made inquiries regarding an Audit and have been told to start at $2,500 as being the cost for the Audit. Is this economical for a small One Man Adviser Practice supporting the Mum's & Dad Investors Savings. Being in Blenheim or even the South Island, at this stage of the Game, there are no registered AML Auditor Firms in the South Island.
I would be a Starter to support your Suggestion that Advisers could Audit fellow Advisers. Thanks again Nigel, I will follow the comments with Interest.
On 17 April 2014 at 1:23 pm Gerald Gates said:
Maybe a senior adviser would have good back ground knowledge of the audit requirements and not be a newbie in the audit game, requiring time to setup and not out to make their fortune from ever increasing compliance regimes.
What about adopting the stance of the NZICA, where they realise that 1 and 2 man practitioners have struggled with 3 yearly reviews due to the expense loading and hence have lengthened the period to 5 yearly reviews

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