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Advisers in dark about AML

Some adviser businesses do not realise they are reporting entities under AML legislation, the FMA says.

Friday, March 6th 2015, 6:00AM 1 Comment

by Susan Edmunds

Advisers are drawn into the AML rules when they deal in category one products. 

They must have a written risk assessment, and a regularly-audited AML/CFT programme.

Not complying the requirements can result in penalties including fines up to $200,000 for an individual.

Meredith Cornelius, a Nelson-based adviser who set up a business helping others deal with their AML requirements, said there were likely a number of advisers not aware they were reporting entities.

She said people who were not AFAs but offered KiwiSaver advice could be caught out. 

Eight hundred reporting entities filed annual reports to the FMA last year but Cornelius said if all KiwiSaver advisers had completed a return, the number should have been higher than that.

FMA spokesman Andrew Park said the FMA was trying to boost education among AFAs and RFAs to help them understand whether they were caught in the AML legislation.

“We aware that some adviser businesses, including RFA firms which are advising on KiwiSaver, have not realised that they are brought into scope of the Act, because KiwiSaver is category 1 financial product."

He said the FMA was trying to boost awareness by discussing AML/CFT on adviser monitoring visits, providing material on the website, supporting adviser associations in their education, supporting the compliance community of auditors and consultants who could educate clients and discussing the requirements with providers so that if they engaged with an adviser to sell a product, they could tell them about their AML/CFT obligations.

“We take a firm approach with the basic standards of compliance around AML/CFT, and all regulation. We are working to help adviser businesses understand where they would be captured by the AML/CFT Act and continue to support those who are in scope to help them to get compliant.”

Park said: “RFAs who operate in their own name and not through a company or other unincorporated body will not be a reporting entity. But if they operate under the umbrella of a company or unincorporated body, even if they are the only adviser and the amount of KiwiSaver they sell is immaterial, the company or unincorporated body will be a reporting entity.  It is also irrelevant whether their clients are retail or wholesale clients or if they sell KiwiSaver on the basis of a class service only.“

« Industry leader calls for one class of adviserFMA outlines supervision approach »

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Comments from our readers

On 9 March 2015 at 9:59 am Concerned AML Party said:
The last paragraph hasn't got it quite right - AFAs who operate in their own name can be captured where they are essentially operating as an intermediary. AFAs should have a look at the 'Guide for small financial adviser businesses' (particularly pages 4 & 6) on the FMA website for proper guidance. For example, on page 4 it states:

"Under AML/CFT law, if you are required to be an AFA by the Financial Advisers Act 2008 (the
FA Act), you will be a reporting entity when you arrange for another reporting entity (such
as a product provider) to provide a relevant service (such as selling a financial product) to
your customer."

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