NZ FMA Announces to Tighten AML/CFT Approach

FMA intends to closely monitor firms’ processes, with comprehensive assessments of how they onboard new customers, their monitoring activities, and filing of SARs to the FIU.

The Financial Markets Authority (FMA),  New Zealand’s government agency responsible for financial regulation, has announced plans to enforce a tightened approach to non-compliance with anti-money laundering and countering financing of terrorism (AML/CFT) rules, according to a new report.

The FMA released its AML/CFT Monitoring Insights Report that discusses the country’s AML/CFT Act compliance activities over the past three years (1 July 2018 – 30 June 2021). The report mentions that the FMA issued 27 private warnings, three public warnings and held its first-ever legal proceedings against the derivative issuer CLSA Premium NZ due to NZ$770k AML breach. Compared to the FMA’s previous monitoring report (1 July 2016 – 30 June 2018), one public warning and 17 formal, private warnings were issued.

“New Zealand’s AML / CFT regime has been in place for eight years and companies have had ample time to comply with the regulations,” said James Greig, FMA’s director of oversight. “As a result, we now have less tolerance for companies that do not meet their obligations, which translates into an increased number of enforcement actions.”

AML/CFT measures are mandated for businesses worldwide to prevent them from being used, intentionally or unintentionally, by criminal entities for money laundering or terrorist financing activities. To automate compliance processes, companies typically employ AI-powered AML/CFT solutions, making it effortless to avoid facing hefty fines and penalties. 

The FMA has also revealed that Suspicious Activity Reports (SAR) submitted to the Police Financial Intelligence Unit (FIU) significantly rose from 170 in 2018-2019 to 257 in 2019-2020, and 493 in 2020-2021 respectively. 

New Zealand’s AML Act requires all reporting entities to perform self-risk assessments and devise AML/CFT compliance programs, audited every two years (now every three years, with effect from 9 July 2021) or at any other time at the request of their AML/CFT supervisor.

In the future, FMA intends to closely monitor firms’ processes, with comprehensive assessments of how they onboard new customers, their monitoring activities, and filing of SARs to the FIU.

The regulator will also be assessing how well entities relied on the FMA’s COVID-19 related guidance, that limits an entity’s ability to onboard new customers and perform account monitoring. The FMA will be assessing if businesses applied the guidance correctly.

The FMA will also be monitoring the financial advice sector following the implementation of the financial advice regime in March 2021, which means some financial advisers will become FMA-reporting entities. The FMA will closely monitor the sector to determine if there is any material change in the level of ML/TF risk.

Suggested Read: AML Screening in the light of Compliance Regimes Around the Globe