AML break for RFAs
Registered financial advisers have been given anti-money laundering relief.
Friday, June 29th 2018, 6:00AM 
4 Comments
by Susan Edmunds
An exemption has been issued for registered financial advisers who arrange for a manager of a retirement scheme to provide services to a customer or an intended customer of a retirement scheme.
Authorised financial advisers are usually reporting entities.
Erin Lubowicz acting general manager, criminal justice policy, at the Ministry of Justice, said the exemption did not apply in respect of any other financial products, a discretionary investment management service, or an investment-linked contract of insurance.
She said conditions included that the RFA had reasonable cause to believe the manager of the retirement scheme was compliant with its AML/CFT obligations.
They must act as an agent of the manager of the retirement scheme and conduct due diligence on the customer or intended customer, report suspicious activities to the manager, provide transaction records and identity verification records to the manager, establish procedures that were consistent with the manager’s risk assessment and that were compliant with the AML/CFT Act and ensure its relevant employees were vetted and trained on the manager’s AML/CFT obligations.
“This is on the basis that there is a low anti-money laundering risk associated with KiwiSaver and other retirement schemes and, in the absence of the exemption, there would be duplication of AML/CFT obligations between registered financial advisers and the managers of the retirement schemes," Lubowicz said.
Bodies corporate and PAYE intermediaries are among other practitioners exempted.
Strategi managing director David Greenslade said it was not clear that the exemption for RFAs was needed. “All it’s going to do is antagonise a whole heap of AFAs potentially.”
The exemption expires in June 2023.
Under the Financial Services Legislation Amendment Bill, it would be the financial advice provider who carried the AML obligation, not the individual adviser, whether they were currently RFA or AFA.
Justice Minister Andrew Little rejected suggestions that the AML regime was achieving few results.
“We are making it harder for criminals to launder money as this provides a significant disincentive to carrying out the criminal activity in the first place. It is estimated that each year about $1.35 billion is generated from illegal drugs and fraud and illicit funds are often laundered through New Zealand businesses.
“The law changes put in place practical measures to protect businesses from being misused by criminals.
“New Zealand’s AML/CFT system has adopted the international standards set by the Financial Action Task Force and responds to money laundering risks identified in New Zealand. Because our system is in line with other countries, international banks and businesses are willing and able to work with New Zealand because they have confidence that serious measures to counteract money laundering and funding of terrorism are in place.”
He said as the system matured it would help to stop New Zealand being used as a money laundering destination. Through the rest of the year, lawyers and accountants will be introduced into the regime.
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AML/CFT regulations (16.3 I think) always allowed Product Providers to make distributors agents for AML/CFT. Which aligns with your comment Murray that advisers could collect AML/CFT requirements for a provider without being caught as an AML/CFT reporting entity. To my knowledge Generate KiwiSaver were one of the few who offered this option to RFAs. RFAs who distributed other KiwiSaver providers via class advice were caught under the legs and regs as reporting entities. This is a good tidy up measure in my opinion and reduces double up. It could be read that when AFA and RFAs disappear it may apply to AFAs who only distribute KiwiSaver and not other investments?
To avoid duplication.
The Kiwisaver providers other than Generate?
I wonder where the submissions for this exemption came from - [I certainly didn't hear any discussion withing adviser associations.Perhaps we were left out of that loop!]
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I didn't see that the notice applies only to RFAs doing Kiwisaver (short-hand for retirement scheme); I think it might just apply to any FAA financial adviser with respect to Kiwisaver.
Second the notice says :
This exemption is made subject to the following conditions:
(a) the relevant financial adviser has reasonable cause to believe the manager of the relevant retirement scheme is compliant with its obligations under the Act; and
(b) the relevant financial adviser must, for the purposes of section 34 of the Act, act as an agent of the manager of the relevant retirement scheme, and agree to carry out, and carry out, the following obligations on behalf of the manager:
(i) conducting customer due diligence and obtaining and verifying any information required under the Act for each customer or intended customer of the retirement scheme introduced by the financial adviser:
(ii) reporting to the manager any suspicious activities or patterns of activities that the financial adviser becomes aware of in relation to any customer or intended customer introduced to the retirement scheme by the financial adviser:
(iii) providing transaction records and identity verification records to the manager in a timely manner:
(iv) ensuring that any employee engaged in AML/CFT-related duties by the financial adviser is appropriately vetted and provided with training on the manager’s obligations under the Act:
(v) establishing procedures that are consistent with the manager’s risk assessment and that are compliant with the Act.
Doesn't this mean the adviser still has to collect the AMLCFT documents but isn't a reporting entity if their sole interface with AMLCFT is Kiwisaver.
Much ado about nothing?