Does the AML exemption for financial advisers apply to you?
From 30 June 2018, financial advisers who were only caught under the AML/CFT Act 2009 (the Act) because they sold retirement scheme products, become exempt from their direct obligations under the Act. The exemption expires on 30 June 2023.
Examples of retirement schemes include registered schemes (such as KiwiSaver schemes, or superannuation schemes), and workplace savings schemes. Note that, single-person self-managed superannuation schemes are excluded.
The rationale for the exemption
The exemption recognises that:
- Retirement schemes are low risk for AML/CFT activities.
- Financial advisers' AML/CFT obligations, as a result of selling retirement scheme products, effectively have advisers undertaking AML/CFT functions on behalf of retirement scheme managers who undertake many of the same checks in relation to the same client.
- Duplication of AML/CFT activities by both the scheme manager and financial advisers is resulting in unnecessary compliance costs for the financial adviser.
The ‘good’ news
If you were only caught under the Act because of these retirement products, the ‘good news’ is that you are now exempt from a number of AML/CFT obligations such as:
- Undertaking and maintaining a risk assessment and AML/CFT programme;
- Designating/appointing an AML/CFT Compliance Officer for the business;
- Filing an annual AML/CFT report, and
- Undertaking a 2-yearly independent AML/CFT Audit.
There are some ‘hooks’ with the exemption – plus you must still undertake basic AML/CFT duties.
- You must be confident that the provider of the retirement scheme is compliant with the obligations under the Act.
- You must act as an agent of the provider of the retirement scheme. Strategi recommends you ensure you have in place an agency agreement with the product provider, which should include clearly defining the obligations of both the adviser and the provider under the Act.
In addition, you must still carry out certain AML/CFT-related functions on behalf of the product provider:
- Undertake CDD for each client;
- Report (to the product provider) any suspicious activities (or patterns of suspicious activities) you become aware of during your interactions with the client;
- Provide transaction records, and identity verification records to the product providers;
- Ensure the procedures you follow are consistent with the product provider’s risk assessment (and are compliant with the Act); and
- Ensure any employee engaged in AML/CFT duties is appropriately vetted and provided with training on the product provider’s obligations under the Act.
When does the exemption NOT apply?
This exemption does NOT apply to financial advisers if, in addition to acting as an intermediary of the retirement scheme product providers, they also provide:
- A financial adviser service for financial products such as direct securities, derivatives, and managed funds; or
- A DIMS service; or
- An investment-linked contract of insurance.
If you are unsure whether or not this exemption applies to you and/or what it means for your business, contact us for guidance.