New Zealand’s Financial Markets Authority (FMA) 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.
According to the regulator, 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.
- 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 firm.
James Greig, FMA Director of Supervision said:
“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.”
It is not alleged that Sharesies has allowed or enabled money laundering or the financing of terrorism to take place.