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The Financial Market Authority (FMA) has issued a formal warning to Pencarrow Private Equity Management for (AML/CTF) failings.
The FMA found “systemic failings” in keeping customers’ personal records. As per the authority, the records of customers who invested in the firm’s Fund V between April and July 2018 weren’t readily accessible. Moreover, Pencarrow didn’t provide data on six of the sampled client files which led to suspicion that the firm has performed sufficient Customer Due Diligence (CDD) checks.
Pencarrow is a Managed Investment Scheme (MIS) that provides capital to retail participants. The AML/CTF Act requires it to report to the FMA, but because it doesn’t provide services or goods to retail investors, the FMA has not granted it a licence. Pencarrow focuses on providing capital for midsized New Zealand companies.
Although the risk of money laundering activities was low with the clients involved, the FMA said, “Pencarrow failed to take its compliance obligations seriously at the time”.
The FMA discovered all the issues as a part of its regular checks on the financial sector for Anti Money Laundering and Countering Terrorism Financing (AML/CTF) compliance.
Margot Gatland, FMA Head of Enforcement, said: “Robust and readily accessible records are essential for an entity to fulfil AML/CTF requirements, as firms need to continually monitor their customer base to identify any inconsistencies and report any suspicious activities. Good records also enable third parties such as auditors and Supervisors to review an entity’s compliance effectively and efficiently.”
The FMA’s warning compels Pencarrow to move quickly with its subsequent independent AML/CTF audit so that it is finished within 4 months of the issued warning (i.e. 5 April 2023). The FMA will also make a follow-up inspection visit with Pencarrow about its Fund VI onboarding to evaluate compliance.
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