No need to panic. But it’s a good time to check your risk assessment is up-to-date.
The New Zealand Financial Markets Authority (FMA) has published its latest Anti-Money Laundering and Countering Financing of Terrorism Sector Risk Assessment 2021.
We recommend reading through the report with your next morning coffee. It’s an interesting read as it summarises the money laundering and terrorism financing risks faced by the sectors the FMA supervises.
What do you need to do?
Are you responsible for the AML compliance at a reporting entity that is supervised by the FMA?
If so, there are a few things that you need to do:
- Review the updated SRA and information for your relevant sector
- Review your risk assessment and update this accordingly
- Read up on the guidance on virtual assets and incorporate this into your risk assessment where appropriate
What is a sector risk assessment?
The SRA provides a risk rating for each of the 10 sectors the FMA supervises along with commentary. The ratings are an assessment of the inherent money laundering and terrorism financing risks faced by each sector. The new SRA replaces the earlier 2017 version. However, the overall risk ratings for each of the sectors remain unchanged.
Other key SRA methodology changes noted by the FMA are:
- A more detailed analysis of terrorism financing
- Considering details in New Zealand’s 2019 National Risk Assessment
- The inclusion of virtual assets and virtual asset service providers (VASPs)
- Considering the effect of increased use of online investment platforms
Virtual assets
Since the 2017 SRA was published, virtual assets (e.g. cryptocurrency, tokens and crypto-assets) have rapidly risen in popularity. VASPs – which facilitate virtual asset transactions – are included in the new 2021 SRA for the first time.
The FMA only supervises a very small number of VASPs in New Zealand. The primary supervisor of VASPs is the DIA. However, the FMA expects the reporting entities it supervises to familiarise themselves with the risks and vulnerabilities associated with virtual assets. These risks should then be incorporated into risk assessments where appropriate.
Translation? Read up on the guidance and if you are likely to deal with virtual assets directly or indirectly, ensure you have documented these risks, as well as any controls you will put in place. Aside from the information in the SRA, another good place to source supervisor guidance on virtual assets and VASPs is the DIA’s earlier published guideline.
Online investment platforms
The SRA found providers of client money or property service (previously known as brokers and custodians) were medium-high risk. It found there has been a rapid increase in the use of online investment platforms in this sector.
Such platforms allow customers to quickly register for online accounts and begin trading shares or other financial products. Non-face-to-face onboarding and large transaction volumes increase the risk that money laundering and/or terrorism financing activity may occur via these platforms.
Fast-growing businesses in the sector need to ensure that effective resourcing and processes are in place for AML and CFT. It’s important that their compliance abilities keep up with their speed of growth and changes to technology. The FMA has started issuing warnings to businesses in the sector who have failed to meet their AML obligations.
Reviewing your own risk assessment
Now is a good time to review and update your own risk assessment. You should incorporate any new risks or information identified for your sector in the SRA. This may form part of an annual review of your risk assessment, or be carried out as a standalone activity. During monitoring, the FMA will look to see if new and/or updated supervisor guidance has been factored into a reporting entity’s risk assessment, policies, procedures and controls.
Thanks for reading! See you next time 😃
