The Financial Markets Authority (FMA) in New Zealand has gone public with a formal warning to Sharesies for having insufficient anti-money laundering measures in place.
Though it is not alleged the share trading platform has allowed or enabled money laundering, or financing of terrorism, in the FMA’s view, the company failed to:
- obtain information about the purpose of the proposed business relationship from most customers;
- gather sufficient information to determine if some customers should be subject to enhanced due diligence; and
- complete identity verification for up to 7,815 customers with an account balance of more than NZ$1,000 (US$687, €585) as standard customer due diligence.
The FMA requires Sharesies to:
- obtain information from all current customers to show their reasons for using the platform;
- amend onboarding process to capture that information in the future;
- develop and implement a process to complete identity verification at the time of account application and train staff on those processes;
- obtain sufficient information from all customers who used the word ‘trust’ in the account application;
- complete enhanced customer due diligence if they are trusts; and
- 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,” the FMA said.
Its director of supervision James Greig added: “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.”
The warning covers Sharesies Limited and Sharesies Nominee Limited.
Greig pointed out: “We do not consider the contraventions were deliberate. Sharesies is cooperating with the FMA and has taken steps to update and strengthen its practices.”
Those measures include asking specific questions of customers and using biometrics to substantiate their identities, chairwoman Alison Gerry was reported as saying by broadcaster Radio New Zealand.
In addition, it is employing tighter controls on people acting as trusts, though Sharesies does not support or encourage the use of the platform by trusts, she added.
The figure of 7,815 mentioned by the FMA represented 2% of its total user base.
“Sharesies has been in contact with all of these customers to establish a clearer link between them and their identity documentation,” Gerry said.
FinCrime Global is back for another 2 information-packed days, featuring a series of brand new topics and themes.