The Financial Markets Authority (FMA) has issued a formal warning to brokerage firm Fullerton Markets Ltd under section 80 of the Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT).

An inspection of Fullerton’s AML/CFT compliance by FMA staff showed that the company did not have in place adequate risk assessment or AML/CFT compliance programmes. These are essential components of complying with the AML/CFT Act. These programmes ensure that firms have robust systems and processes in place to detect and deter money laundering and the financing of terrorism.

Fullerton also failed to carry out customer due diligence in line with the Amended Identity Verification Code of Practice. Fullerton failed to take reasonable steps to fully identity clients who are a politically exposed person, as required under s 26 of the AML/CFT. A politically exposed person is someone who has been entrusted with a prominent public function, whether in New Zealand or abroad.

Under the warning, Fullerton is required to undertake a series of actions in order to ensure it complies with the law:

• Prepare and implement an AML/CFT risk assessment to the required standard
• Prepare and implement an AML/CFT compliance programme to the required standard
• Review its customer onboarding programme and review all customers onboarded since the start of business.
• Develop a more appropriate level of transaction monitoring rules. Review all customer transactions since the commencement of business. Any suspicious transactions to be reported to the Finance Intelligence Unit of the New Zealand Police.
• Undertake a review of all customers to check if they are a politically exposed person, using an internationally recognised search tool.

“The AML/CFT Act came into force in June 2013 and the FMA and other supervisors have provided guidance and assistance to firms to help them to comply,” says Liam Mason, FMA Director of Regulation.

“We know that reporting entities have invested significantly in systems and resources to comply with the requirements of the law. It’s not fair on those who have made this effort if others do not do so.  The FMA signalled in our last annual report that we would take formal action where we see firms failing to meet these requirements.”

Mr Mason warned that if Fullerton Markets fails to take the actions required in the warning, the FMA will consider further regulatory responses, including civil action, which can lead to penalties of up to $2 million.