AML/CFT obligations apply to any entity that provides financial adviser services in respect of category 1 product.
If you are an RFA operating via your NZ registered company and you advise, and will continue to advise, on KiwiSaver, managed funds, shares, investment linked contracts of insurance, or Whole of Life or Endowment policies, then your company will be deemed to be a reporting entity (RE) and have an AML/CFT obligation under the AML/CFT Act Do you have a design in mind for your blog? Whether you prefer a trendy postcard look or you’re going for a more editorial style blog - there’s a stunning layout for everyone.
The common misconception is that only AFAs have AML/CFT Act obligations and RFAs who provide class advice on Category 1 products are not caught.
This is definitely incorrect. The Anti-Money Laundering and Countering Financing of Terrorism (Definitions) Regulations 2011 clearly sets out that any person (this includes RFAs) who as an entity, provides financial adviser services in respect of a category 1 product, including to wholesale clients, will be an AML/CFT Act reporting entity.
It is all about the financial adviser service that is provided. It could be as basic as giving advice about acquiring or disposing of (including refraining from acquiring or disposing of) a category 1 product.
If the company receives some form of ongoing or trail income from a category 1 product or a client reasonably believes the adviser is ‘looking after ‘ their investment, then there is a good chance there is an implied expectation that a financial adviser service is being provided. If the client is making a regular contribution to these products, then the situation is even more black and white.
As of 30 June 2013, an RFA who is a reporting entity must be fully compliant with every aspect of the AML/CFT legislation. This does not mean the RFA/Reporting Entity should have started the process on that date. They actually have to have in place their risk assessment, their written AML/CFT programme, have vetted their clients and have undertaken the training by that date. The penalties for non compliance are huge.
Consequences for non-compliance
A reporting entity that fails to comply with the various requirements of the AML/CFT Act may face penalties ranging from a formal warning or enforceable undertaking, (an undertaking of a certain course of action a reporting entity makes to an AML/CFT Supervisor, which is enforceable by law), to serious criminal and civil penalties. These could range from fines of up to $200,000 for an individual, and up to $2 million for entities.
Knowingly or recklessly not complying with the AML/CFT obligations could attract a fine of up to $300,000 and/or a term of imprisonment up to 2 years for individuals and a fine up to $5 million for an entity.
Disclaimer: This article is general in nature. It is written to assist advisers who are AFAs and RFAs in small businesses to determine if they are likely to be a “reporting entity” and have obligations under the AML/CFT Act. This article is not legal advice, and should not be relied upon as such. This article is not a comprehensive guide covering all situations an individual or an entity may be engaged in to determine if they are a reporting entity. The directors and staff of Boutique Advisers Alliance are not responsible for any error in or omission from this article.