1 Comment 1 Commentby Susan Edmunds
The FMA has released its first AML/CFT monitoring report. There are 588 AFAs who are reporting entities, of 796 supervised by the FMA.
In its first year of monitoring, it conducted 36 reviews of REs. The largest number of those were of financial advisers. There were six on-site reviews of advisers and five desk-based.
The FMA said it was pleased with REs’ attempts to comply. But there was non-compliance in a large proportion of those visited.
We considered that REs’ efforts to comply with their obligations under the AML/CFT Act simply did not meet expectations. Often there was a lack of support for AML/CFT compliance from senior management. This is of particular concern to us, as effectiveness of the AML/CFT regime will be substantially reduced if issues are not escalated and addressed at a senior level.”
Three formal warnings were issued and the audits of five REs were brought forward in response to concerns about their compliance. The FMA would not say whether they were advisers.
Some of the FMA’s concerns included the adoption of generic risk assessments, not linking money laundering risks to the RE’s business, and a disconnect between the risk assessment and the AML/CFT programme.
“In these cases REs appear to be unaware of the need for the risk assessment to be used to develop the AML/CFT programme. In the worst cases, there have not been any policies or procedures to support the AML/CFT programme, or when developed, they have not been implemented in practice.”
Some Res had not properly developed a transaction monitoring system. “When asked, some of these entities cannot explain to us what criteria they use to identify a transaction as unusual.”
The FMA said if voluntary compliance was not achieved, it would use its enforcement powers. It has already issued a small number of non-public warnings and litigation is also possible.
Barry Read, of compliance firm IDS, said the FMA report mirrored his firm’s experience.
IDS had encountered problems with templates, too, and advisers who had not given thought to clients’ individual circumstances and potential for risk.
One of the frustrations for advisers was their own identification system for clients could be different to that required of them by product providers, he said.
“There’s a good chance the adviser knows the person and has been to their house. But when they hand over a printout from the white pages to confirm their address, the provider say that’s not enough.”
That double-up of due diligence requirements was something that should be addressed, he said. “I still have a question mark over whether or not financial advisers whose business doesn’t receive monies directly should be a full RE.”
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I thought the FMA’s job was to restore and build confidence in financial markets, so pray tell me why are they in the AML space ??
And yes I have known Rex and Mary for 8 years as we are good friends of their daughter. They became clients a year ago
But I recently had to get evidence that they live where I know they live -
I was not allowed to sign a declaration to confirm where they live
But I HAD TO sign off that the documentary evidence of residence they gave me was correct
Madness if ever I saw it !
Now I am totally anti drugs, as are Rex and Mary
As a pilot I would be happy to take all drug dealers parachuting FOC with a WWII surplus (never repacked) parachute over some remote cold island
No one even remotely suspicious gets to become one of my clients
And I don't take cash, don't handle clients money, as it goes direct to Aegis (who have their own AML checks)
But worst of all, after never ending busy weeks trying to do my best by my clients, and also writing articles and books to try and help Joe Public with his money, I get to the end of the week, and look at what jobs are outstanding
And you guessed it – AML paperwork
Pretty discouraging
I get a sense of achievement out of my work and writing
But from AML I only get an acute sense of a gross waste of my time
So it is no surprise to me that someone’s AML audits don’t look so hot – no doubt they are all trying to do those jobs that actually matter first
To those who write the rules – PLEASE try and understand we are mostly good guys trying help our clients get ahead
PLEASE support us in that role
PLEASE
I need TIME for recreation too – my motor glider all too often lies unused in the hangar