FMA warns 12 firms about money laundering

New rules for financial, legal and real estate firms are aimed at preventing money laundering.
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New rules for financial, legal and real estate firms are aimed at preventing money laundering.

The Financial Markets Authority has sent warning shots over the bows of twelve financial advisory firms for failing to provide anti-money laundering audits.

The warning comes as financial advisers cope with time-consuming rules requiring proofs of identity of clients, often verified by a Justice of the Peace.   

The recent Anti-Money Laundering and Countering Financing of Terrorism Act covering banks, casinos and financial advisers will soon apply to lawyers accountants and real estate agents.

Financial investment rules are becoming more complex.
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Financial investment rules are becoming more complex.

Money laundering rules were international agreements and there was no getting away from them, Institute of Financial Advisers president Michael Dowling said.

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But they could be simplified. External auditors rigorously applied the rules because they had to protect themselves too, he said.

Where an elderly client no longer had a driving licence or passport for identification, auditors would accept a Gold Card or bank account and state it as a variation in their reports, Dowling said.   

One study showed it cost a financial advisor about $25,000 a year to comply with client reporting rules, Dowling said. 

In a criminal case, failure to comply could mean imprisonment for two years or $300,000 fine for an individual, or $5m for a body corporate.

Bruce Cortesi, chairman of the Professional Advisers Association, said it often took hours verifying addresses and details of long-standing clients or trustees involved in investments.

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Nine of the companies targeted by the FMA failed to provide audits, two didn't respond and another never submitted an annual report.

Liam Mason, director of regulation at the FMA said the rules had been in place for three years and firms have had sufficient time to meet the legal requirements.

The names of the twelve companies and individuals have not been published because they were small businesses and "to do so would have a disproportionate effect", Mason said.

The FMA is one of three supervisors under the money laundering Act, along with the Reserve Bank of New Zealand and Department of Internal Affairs.

The FMA supervises about 800 firms. Two thirds are financial advisers, and others include issuers of securities, licensed supervisors, and investment managers, fund managers, brokers and custodians, and equity crowdfunding and peer-to-peer lenders.

 - Stuff

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