AML/CFT monitoring report highlights concerns, sets focus

The Financial Markets Authority (FMA) has published an Anti-Money Laundering and Countering the financing of terrorism (AML/CFT) monitoring report setting out the areas requiring further attention by the management and boards of the reporting entities it supervises.

The FMA is one of three supervisors for AML/CFT in New Zealand, alongside the Reserve Bank of New Zealand and the Department of Internal Affairs. The FMA supervises approximately 800 reporting entities.

The report covers the period from 1st July 2016 to 30 June 2018. During this period, the FMA issued 18 formal warnings, including one public warning.

The report highlights a number of issues that should be addressed by boards and management:

• AML/CFT programmes that have not been reviewed or updated to align with the current businesses’ current practices
• AML/CFT risk assessments that are not updated when changes in risks occur
• Customer due diligence including enhanced and ongoing account monitoring remains problematic for reporting entities. An increasing number of entities are using electronic identify verification, but the FMA noted a number of deficiencies with their AML/CFT programmes in this regard.

Details of the FMA’s future monitoring focus are also set out. They include:

• An increased focus on reviewing independent audit reports
• More in-depth reviews of client on-boarding and account monitoring processes
• When undertaking operational reviews, the FMA will focus more on front-line staff who perform tasks such as client on-boarding, to assess their understanding of the obligations.

Liam Mason, FMA Director of Regulation, 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 identified 89 issues requiring remedial action in the period to end of June 2017. This rose to 175 issues for the same period in 2018.

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