The Financial Markets Authority is concerned at the lack of staff training to detect and prevent money laundering and terrorist financing activities.
In its just-released Anti-Money Laundering and Countering Financing of Terrorism Monitoring (AML/ CFT) report, the FMA says staff must be fully trained to be aware of their role to detect and prevent criminals from using their business as a conduit for money laundering and terrorism financing.
It says while progress on this has been made this year, staff training is an on-going process.
The report also notes there are concerns about the continued low level of filing of suspicious transaction reports. The FMA will address this in 2017 by conducting training jointly with the Financial Intelligence Unit.
In May, the Authority issued a public formal warning under section 80 of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009, to Craigs Investment Partners. The warning was for failing to conduct adequate enhanced due diligence, and failing to terminate its business relationship with a client when it had been unable to complete the required level of customer due diligence.
“Craigs did not have a cohesive process for escalating, monitoring and managing AML/ CFT issues, and for ensuring compliance with the AML/CFT compliance programme.
“The warning related to conduct in 2014 and Craigs has, since 2014, taken steps to significantly improve its AML/CFT compliance programme, reducing the chances of similar breaches occurring in the future.”
The FMA supervises about 800 reporting entities, two thirds of whom are financial advisers. Planning is under way to have lawyers, accountants and real estate agents as reporting entities.
After the release of the Panama Papers earlier this year, the FMA investigated how some reporting entities were meeting their obligations for such matters as identifying higher-risk customers and those subject to enhanced due diligence and the processes for identifying whether there was a relationship with Mossack Fonseca and its affiliates.
In particular, the FMA found that higher-risk customers must be reviewed more frequently than low-risk customers, and should be flagged for on-going customer due diligence and targeted transaction monitoring.
Higher-risk customers are those deemed to be those who appear to have no commercial connection with or business in New Zealand.
The report says that, after three years of the Act, firms and individuals have had time to become familiar with their obligations and it expects that reporting entities have successful internal controls in place.
And it warns that it will be taking “a stronger position” in the future where it sees a failure to meet obligations.
It will, over the next 12 months, also look at how the reporters ensure staff are trained to a satisfactory standard, and what on-going training programmes are in place.
Of the 800 reporting entities, almost half (45%) are in Auckland with 14% in Wellington and 10% in Christchurch.