New Zealand’s Financial Markets Authority (FMA) will increase reviews on independent audits as well as client onboarding and account monitoring processes.
The FMA has published its Anti-Money Laundering and Countering the financing of terrorism (AML/CFT) monitoring report in which it identifies areas which the management and boards of reporting entities need to increase attention.
This report covers the period from 1st July 2016 through to 30th June 2018. During this period the regulator issued 18 formal warnings.
Outlined in the report were areas which need to be addressed by companies. One of these was the AML/CFT programmes which have yet to be reviewed or updated to meet current business practises.
Other areas brought up were AML/CFT risk assessments which fail to be updated after risks occur, and customer due diligence still remaining problematic, including those using electronic identity verification.
In addition to this, the FMA revealed its future focus, which includes deeper reviews of independent audit reports, and the reviews of client onboarding and account monitoring processes. Another key area for focus will be around operation reviews and putting more focus on front-line staff that perform tasks like client onboarding and assess if they understand their obligations.
The FMA uncovered 89 issues which need remedial action by the end of June 2017, which then increased to 175 issues during the same period in 2018.
FMA director of regulation Liam Mason said, “The laws surrounding anti-money laundering and countering the financing of terrorism have now been in place for more than five years. We expect to see more mature policies, procedures and controls in place.
“The FMA is requiring more entities to take remedial action following its monitoring. This is more likely now to be accompanied by formal enforcement action, as we expect reporting entities to understand and meet their obligations. Entities have had enough time to prepare now, and it is only fair to the vast majority of organisations we supervise who meet the legal requirements.”
The FMA is one of three AML/CTF supervisors in New Zealand, working alongside the Reserve Bank of New Zealand and the Department of Internal Affairs. FMA monitors around 800 entities.
Australia-based RegTech company Arctic Intelligence provides companies with the tools to better understand their money laundering risks and build better risk profiles.
Commenting on the hidden dangers facing firms with outdated and unmonitored AML/CFT programmes, Arctic Intelligence founder and CEO Anthony Quinn said, “Businesses that adopt a ‘tick-box’ approach to money laundering and terrorism finance compliance are running a number of risks – firstly, that their businesses will be seen as soft targets by criminal networks, potentially exposing them to illicit cashflows.
“Secondly, that they will be seen by regulatory supervisors for not doing enough to take their anti-money laundering responsibilities, which could expose them to regulatory risk of being shut down, under closer scrutiny via supervisory orders or even significant fines levied against their businesses, individual directors and management.”
Quinn went explained the FMA’s action has come as many businesses across New Zealand are struggling with simple components of AML compliance. This report has come as a clear warning shot that the FMA is planning to increase enforcement effort if companies continue to fail in their AML or CTF requirements, he said.
Operating environments are always changing, and firms are presented with different threats and risks as they scale, launch new products, enter new markets or new geographies. Combining this with the increasing level of regulation expectations, mean businesses have a lot of hurdles. Quinn said, “Businesses cannot afford to adopt a ‘set and forget’ approach to risk assessment.”
He added, “We developed AML Accelerate that has grown into becoming the market leading platform for conducting money laundering assessments, designed by experts and used by regulated businesses of all sizes, across over fifteen sectors and countries, including New Zealand where business can not only create risk assessments, they can build out their AML program of control based on the risks identified to ensure their program is fit for purpose and appropriate and proportionate to the typical risks they face.”
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Copyright © 2018 RegTech Analyst
