FMA Warns InvestNow For AML/CFT Deficiencies And Failures

The Financial Markets Authority (FMA) - Te Mana Tātai Hokohoko has issued a formal warning to InvestNow Saving and Investment Service Limited for failing to comply with anti-money laundering requirements, including conducting customer due diligence, and having adequate and effective processes.

The FMA identified the issues with InvestNow through its routine monitoring for compliance with the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act in November 2021 and June 2022.

In the FMA’s view, InvestNow failed to:

• complete standard customer due diligence, including
  • obtaining sufficient information about the nature and purpose of the proposed business relationship from customers
  • taking reasonable steps to complete identity verification of customers and beneficial owners
• conduct ongoing and/or enhanced customer due diligence on certain customers, including taking reasonable steps to verify source of wealth or funds
• establish, implement and maintain an adequate and effective AML/CFT programme

James Greig, FMA Director of Supervision said: “DIY investing platforms are at a higher risk of being targeted for money laundering or terrorist funding due to the highly liquid and digital nature of their businesses, which we outlined in our AML/CFT Sector Risk Assessment 2021. InvestNow failed to ensure it had the appropriate processes and controls to identify and respond to anomalies. Additionally, InvestNow was aware of its shortcomings but the company was slow to respond.

“We recognise the investment trading platforms in New Zealand have encouraged innovation and made trading more accessible. But fast-growing financial services firms must ensure their AML/CFT compliance function grows on par too, otherwise the benefits they bring will be tarnished by the potential for them to be used for illegal purposes; in turn harming New Zealand’s reputation.”

The FMA is requiring InvestNow to:

1. obtain information from its current customers to record their reasons for using the platform
2. complete customer identity verification on its current customers, amend its onboarding process to ensure customer identity is properly verified, and provide training to staff on this process
3. complete enhanced customer due diligence on customers that have made transactions which are complex, unusually large, or have an unusual pattern; amend its processes to ensure enhanced customer due diligence is undertaken when required; and provide training to staff on these processes
4. complete ongoing customer due diligence on customers where there has been a material change (such as the information they have provided or their typical trading behaviour) in the customer’s relationship with InvestNow; amend its processes to ensure ongoing customer due diligence is undertaken when required; and provide training to staff on these processes
5. review and revise its AML/CFT programme to ensure adequate and effective procedures are established for all types of customer due diligence and complex or unusually large transactions
6. revise its AML/CFT programme based on an updated risk assessment that considers the nature, size, and complexity of its business, the products and services it offers, and the delivery methods of these products and services.

InvestNow must prepare a plan describing how and when it will complete these actions and submit it to the FMA by 31 October 2022. The company must also restrict withdrawals and transfers of financial products from customer accounts that require more information about their reasons for using the platform, identity verification, or further customer due diligence.

It is not alleged that InvestNow has allowed or enabled money laundering or the financing of terrorism to take place. The FMA also acknowledges InvestNow has taken steps to comply with the AML/CFT Act.

The warning was issued under section 80 of the AML/CFT Act, in which the FMA may issue a formal warning if there are reasonable grounds to believe a person has engaged in conduct that constitutes a civil liability act.

© Scoop Media