by Susan Edmunds
Kiwibank this week received a formal warning from the Reserve Bank for not having fully compliant customer due diligence (CDD) procedures in 2013 and 2014, including requirements for existing customers to top-up their identification details, performing checks for “high risk” customers, verifying the sources of funds for those customers and collecting address information for customers conducting occasional transactions in a branch.
Meredith Cornelius, who provides AML/CFT compliance consulting services to advisers, said she did not think many advisers would be guilty of these problems.
“Most of these AFAs don’t advise on transactional-only clients, but have long-term relationships. Also most of the small retailer advisers are using checklists and are pretty aware of the required CDD.”
She said advisers would usually know where money had come from because their clients were people they had worked with for some time, in investment and financial planning.
But there was still a lesson to learn, she said.
“This should serve as a reminder to verify the source of funds as practicable and sensible and include a file note or note on the clients’ CDD checklist. The bottom line is most of us know about our clients’ financial affairs pretty thoroughly and their circumstances.”
Gavin Austin, of ABC Compliance, said there would be other businesses whose processes were not up to scratch.
He said larger businesses in particular had the problem of monitoring all of their staff members' activities and trying to maintain consistency. He said systems should be checked regularly. “Always inspect what you expect.”
He said his own audits had shown that in firms of a handful of advisers the quality of each person’s CDD would vary.
Kiwibank said it accepted it did not meet some of the requirements and had taken steps to remedy the issues identified.
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