Media Release
MR No. 2021 – 39
The Financial Markets Authority (FMA) - Te Mana Tātai Hokohoko – has issued a formal warning to Sharesies Limited and Sharesies Nominee Limited for failing to have sufficient anti-money laundering procedures, policies, and controls in place.
The FMA identified the issues with Sharesies as part of its ongoing monitoring of compliance with the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act.
In the FMA’s view, Sharesies had failed to:
- obtain information about the nature and purpose of the proposed business relationship from most customers
- obtain sufficient information to determine whether certain customers should be subject to enhanced customer due diligence
- complete identity verification for up to 7,815 customers who had an account balance of more than $1000 as part of standard customer due diligence.
The FMA requires Sharesies to complete a number of actions to meet its obligations under the Act.
Sharesies must:
- obtain information from all its current customers to show their reasons for using the platform and amend its onboarding process to capture this information in the future
- develop and implement a process to complete identity verification at the time of account application and provide training to staff on these processes
- obtain sufficient information from all customers who used the word ‘trust’ in the account application process and complete enhanced customer due diligence if they are trusts – a requirement under the Act
- adequately verify the identity of all customers and restrict withdrawals or transfers until those checks are completed.
These requirements are standard practice for AML/CFT reporting entities in completing customer due diligence, including why the customer is transacting with a firm¹.
James Greig, FMA Director of Supervision said: “We welcome the way online investing platforms like Sharesies have opened up the investing landscape in New Zealand, but it’s essential that fast-growing businesses ensure their compliance processes and policies keep pace.
“We have made this warning public because Sharesies’ contraventions appeared to be symptomatic of a business that has grown quickly without ensuring fully effective processes and controls were in place for AML and CFT. It’s important for all firms to understand our expectations under the AML/CFT Act. Sharesies has built a significant customer base over a short period and we consider there is a risk of the business being susceptible to money laundering if it continues with current practices. We do not consider the contraventions were deliberate. Sharesies is cooperating with the FMA and has taken steps to update and strengthen its practices,” Mr Greig said.
“New Zealand’s anti-money laundering laws have been in place for some time now and are designed to thwart criminals and maintain integrity in our financial system. It’s essential that firms have the appropriate systems and controls in place.”
It is not alleged that Sharesies has allowed or enabled money laundering or the financing of terrorism to take place.
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 firm has engaged in conduct that constitutes a civil liability act.
Download the FMA warning to Sharesies PDF.
ENDS
¹ Standard customer due diligence (CDD) is covered under sections 14 to 17 of the AML/CFT Act. Businesses covered by the AML/CFT Act are required to request basic identity information from a customer (e.g. their name, date of birth, address), verify their identity (i.e. confirm a person is who they claim to be), obtain information about the nature and purpose of the business relationship, and obtain sufficient information to determine if the customer should be subjected to enhanced CDD.
Media contacts:
Andrew Park
FMA Media Relations Manager
[email protected]
021 220 6770
Campbell Gibson
FMA Senior Adviser, Media Relations
[email protected]
021 945 323
Notes to editors:
The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 and associated regulations came into full effect on 30 June 2013. Its purpose is to deter and detect money laundering and terrorist financing.
The FMA is one of three supervisors under the Act, along with the Reserve Bank of New Zealand and Department of Internal Affairs. The FMA currently supervises around 750 reporting entities who are required to comply with the Act. Not all are licensed by the FMA.
Roughly two-thirds of the reporting entities the FMA supervises define themselves as financial advice providers (previously financial advisers), but reporting entities also include: issuers of securities, licensed supervisors, derivatives issuers, providers of discretionary management services, fund managers, providers of client money or client property services as well as equity crowdfunding and peer-to-peer lending platform providers.
The FMA expects every reporting entity that it supervises to have an audit of its AML/CFT risk assessment and programme completed every three years or on request. A copy of the audit report must also be provided to the FMA when specifically requested.
