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AML due diligence puts clients off

Requirements imposed by the Anti-Money Laundering Act are serving as a disincentive to clients thinking about putting their money with financial advisers, it has been claimed.

Friday, October 2nd 2015, 6:00AM 2 Comments

by Susan Edmunds

Under the AML/CFT Act, financial advice businesses that deal in category one products are reporting entities. They must complete a risk assessment of their business, establish and maintain an AML/CFT programme, conduct customer due diligence including identification and verification of identity and report any suspicious transactions.

But Bill Raynel, of Investment Solutions Northland, said it was not always well-received by clients when he asked for identity documents such as passports and driver's licenses.

“I see the look on their faces when I ask for documents. Sometimes it’s such a bother that they throw their hands up.”

He said some felt as if their integrity was being challenged. “It damages the relationship because they don’t like that it seems as if you are questioning their integrity. With older people, who have the lump sums we are looking for, it’s a different world for them. If it is their first experience outside a bank to look at other options they don’t know it exists and it is a bit of a shock for them.”

In a couple of cases it had been enough to tip clients over to decide not to go ahead with an investment, he said.

“You do all the hard work of getting the bums on seats, talking to them and doing all the important stuff but when it gets down to the line and it’s time to pass the money over, it’s enough to waste all that time.  At the end of the day you’ve spent all that time and effort to get to that point and 99.9% of cases will get across the line but there is the odd one where it becomes too much.”

Adviser Sian Ruth, of Accordia, said it was not generally a problem. But she said there had been cases where older clients had had trouble finding the right documentation.

“It can be an issue where, particularly with an older client they no longer have a current passport or driver’s licence and the chances of finding a copy of a birth certificate are pretty low, but so far we have managed to work through the process okay with our older clients.”

IFA president Fred Dodds said he had not heard of many cases where AML requirements were the final straw to stop an investment going ahead.

“But you do get comments where advisers go ‘it’s a pain ... I have been looking after this client for 15 years and all of a sudden I need a driver’s licence, passport, power account and bank statement’. It is an issue but that’s the process, the law, what are you doing to do about it?”

Tags: AML financial advisers

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Comments from our readers

On 2 October 2015 at 6:34 pm henry Filth said:
This will always be a problem until New Zealand devises a universal identification method.

At the moment, providing identification is mandatory, but there is no standard form of identity.

Given that New Zealanders don't seem to want an ID Card (or similar), the issue will be ongoing.
On 4 October 2015 at 9:35 am Grandpa said:
AML documentation has definitely put off at least two older clients with larger sums. Trust Deeds, changed trustees, ID for new ones, et,. just became too much paperwork. Ended up buying rentals in Ak (and are much wealthier now!).
AML act (section 16(1a) requires ...'reasonable steps' to establish ID. This has morphed into an army of compliance people completed with arm bands and jackboots who make unreasonable demands.
How do we 'promote confidence in financial markets' when the first requirements are for Certified ID docs?

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