AML still tough for some AFAs

Smaller financial services firms are still struggling to come to terms with their requirements under AML legislation, consultants say.

Friday, August 5th 2016, 5:59AM 2 Comments

by Susan Edmunds

Richard Manthel

Richard Manthel, of AML Solutions, said big organisations had become proactive about their AML requirements and were doing a better job of upgrading their customer databases, improving their monitoring, keeping up with documentation and recognising the need to have adequate training for staff.

But he said smaller firms tended not to have the same capacity to handle what was required, and their compliance suffered.

“Some of them in a smaller company, whether that’s an AFA or a smaller finance company, the compliance officer role might be 10% of their job. They are very time poor and there is a lack of understanding of legislation.”

He said many were only doing the minimum required and sometimes even basic record-keeping requirements were not met.

“A lot of things aren’t happening with the smaller companies. It has to come right because it’s legislation.”

The supervisors of the AML legislation have started to take more decisive action against those that have been found to be in breach – the FMA issued a formal warning to Craigs Investment Partners and the Reserve Bank issued a warning to Kiwibank.

“Ignorance is no excuse,” Manthel said. “As the regulators become more enforcement-focused there’s more risk of being prosecuted.”

Gavin Austin, of ABC Compliance, agreed. He said some smaller firms still had not fully understood what they had to do.

“I have had to try to get them to have a feel for the difference between compliance and governance. Governance, to a one- or two-person practice, is something they don’t do. They don’t have directors’ meetings or keep minutes.”

Austin said he tried to tell advice firms that they needed to imagine that they were wearing many different hats.

“Check that you are doing it right every few months. Randomly select a few files, and see what has been done. If it has been done to the right standard, send an email from yourself as compliance the officer to yourself as a director giving the direction that the review has found no problems with customer due diligence. It’s a hard concept because it’s something that they are not used to doing. But they need to get used to it.”

The FMA has been approached for comment.

Tags: AML

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Comments from our readers

On 8 August 2016 at 1:46 pm Murray Weatherston said:
Gavin, are you being serious here or are you taking the p*** out of all us sole adviser practices? What earthly purpose is served by me as compliance officer re-examining a few past AML verifications I have done, and then sending myself as manager (and then me as manager sending me as a Director) certificates to say "all is in order" have to be joking.

If I didn't do it right the first time as AFA, why would I see things any differently as Compliance officer (and so on). What you suggest as a CYA exercise seems crazy - unless you have a secret agenda of wanting the FMA to say that in a sole adviser practice, the compliance manager has to be independent of the AFA i.e. the sole adviser practice has to hire a consultant.
On 8 August 2016 at 9:14 pm w k said:
@mw: the last few words of your comment might have hit the bull's eye. bet quite a few "experts/consultants" are waiting to be authorised consultants to financial advisers.

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