Regulatory Actions Escalate Against Banks for Financial Crime in New Zealand

Tougher Stance on Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT)

The Financial Markets Authority (FMA) has taken a tougher stance on non-compliance with AML/CFT rules, issuing three public warnings, bringing its first High Court proceedings under the Act, and 27 formal private warnings over the past three years.

Key Findings from FMA’s AML/CFT Monitoring Insights Report

• The regulator identified 363 issues requiring remedial action during 60 monitoring reviews on firms between July 1, 2018 to June 30, 2021.
• The most common areas of concern were:
  • Inadequate and outdated AML/CFT programs
  • Entity self-risk assessments
  • Insufficient customer due diligence

FMA’s Supervision and Enforcement Efforts

The FMA supervises around 750 reporting entities under the Act, two-thirds of which define themselves as financial advice providers. James Greig, FMA Director of Supervision, stated that New Zealand’s AML/CFT regime has been in place for eight years and businesses have had plenty of time to comply with the regulations.

Increase in Suspicious Activity Reports (SARs)

The number of SARs submitted by firms to the Police Financial Intelligence Unit (FIU) increased significantly from:

• 170 in 2018/19
• 257 in 2019/20
• 493 in 2020/21

Future Monitoring and Enforcement Efforts

The FMA will continue to monitor firms’ processes, with a focus on:

• In-depth assessments of how entities add new customers
• Monitoring of accounts and transactions
• Reporting of suspicious activity to the FIU
• Assessment of how much entities relied on guidance issued in response to COVID-19 limitations

Implementation of Financial Advice Regime

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.