FMA files civil proceedings for AML/CFT non-compliance

  • Legal update

    24 June 2020

FMA files civil proceedings for AML/CFT non-compliance Desktop Image FMA files civil proceedings for AML/CFT non-compliance Mobile Image

Yesterday, the Financial Markets Authority (FMA) announced that it had filed civil proceedings in the High Court at Auckland against CLSA Premium New Zealand Limited (CLSAP NZ), a provider of financial services, for alleged non-compliance with the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act 2009.

The FMA’s media release can be found on its website.

Who needs to read it? Why?

These proceedings will be relevant to all reporting entities under the AML/CFT regime, particularly those supervised by the FMA, as it is a clear example of the approach taken to enforcement within that regime.

What does it cover?

CLSAP NZ (formerly known as KVB Kunlun New Zealand Limited, and a subsidiary of Hong Kong company CLSA Premium Limited) provides various financial services in New Zealand, including broking and financial advice, and is licensed as a derivatives issuer.

The FMA alleges that CLSAP NZ on numerous occasions failed to comply with the following AML/CFT obligations:

  • conducting customer due diligence (CDD), including enhanced CDD;
  • terminating business relationships as required;
  • reporting suspicious transactions; and
  • keeping the required records,

with a maximum possible pecuniary penalty of $2 million.  It was also alleged that this was representative of CLSAP NZ’s general approach to AML/CFT compliance.

The FMA described the alleged breaches as serious and warranting a strong regulatory response to serve as a deterrent for other members of the industry.

Our view

These proceedings reinforce that the AML/CFT supervisors are continuing with their proactive enforcement approach. The international Financial Action Task Force Mutual Evaluation emphasised that New Zealand is not only expected to have internationally-comparable laws but enforcement agencies are expected to have internationally-comparable levels of enforcement of those laws.

The three AML/CFT supervisors (being the Department of Internal Affairs (DIA), the Reserve Bank of New Zealand, and the FMA) have made clear that their intention is to remain resolutely vigilant and assertive in their enforcement activities – see for example the suite of warnings issued by the FMA earlier this year, discussed in our newsletter here, and the various actions taken by the DIA last year including its first criminal prosecution, discussed in our newsletter here.

This also aligns with the clear indication that the AML/CFT supervisors gave in their COVID-19 joint guidance on identity verification (our discussion of which can be found on our website) that AML/CFT obligations have remained and will remain in full force despite the unusual circumstances for the economy and society.

In light of that, all reporting entities should carefully review the effectiveness of their AML/CFT compliance, and proactively address any areas of weakness, ahead of action by supervisors.

What next?

It is not yet known when these proceedings will be heard.  If you have any questions in relation to the AML/CFT regime and how it may affect your business, please contact one of our experts.