CLSA Premium NZ to pay 0k for breaching duties as financial service provider

CLSA Premium NZ to pay $770k for breaching duties as financial service provider

The financial services company CLSA Premium NZ (CLSAP NZ) has been ordered to pay $770,00 for breaching anti-money laundering rules.

CLSA Premium NZ to pay 0k for breaching duties as financial service provider

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The Financial Markets Authority (FMA) filed proceedings against the Hong Kong owned derivatives issuer, formerly known as KVB Kunlun, claiming that the company failed to meet its duties under anti-money laundering and countering financing of terrorism rules (AML/CFT).

The FMA alleged that CLSAP NZ failed to carry out proper checks on its clients, it did not keep adequate records, and it did not report suspicious transactions or sever business ties with some clients between 2015 and 2018.

The breaches covered nearly $50 million worth of transactions, $40m of which were related to deposits made by two individuals.

In May, CLSAP NZ admitted to the breaches but disagreed with the FMA on the penalty it should pay, which could be as much as $7m.

There was no suggestion the company engaged in money laundering.

In the Auckland High Court in July, the FMA called for a penalty of about $1.5m but noted that after various discounts it would come down to $1.2m.

However, CLSAP NZ said a penalty of $420,000 was more appropriate.

In her ruling released late on Friday, Justice Rebecca Edwards said the company had been ordered to pay $770,000.

The judge said CLSAP NZ’s failure to obtain any evidence for the source of wealth or funds for some transactions was “particularly concerning”.

Justice Edwards said although the company had AML/CFT policies they were undermined by executive directors interfering with compliance, the resignation of compliance officers due to disagreements with the directors, and the willingness of CLSAP NZ to accept “suspicious information” to retain business.

The judgment said one employee was asked to resign by a director who told them they needed someone “bendier” as their head of compliance.

“Taken together these features suggest that [CLSAP NZ’s] due diligence non-compliance was not inadvertent; did not arise out of any misunderstanding as to its obligations; or occur as a result of erroneous advice,” Justice Edwards said.

“I am satisfied that this penalty accurately reflects the gravity of the breaches and reflects the principles of deterrence and denouncement.”

FMA head of enforcement Karen Chang the ruling sent a strong message that there are serious consequences for firms that choose to prioritise profit over requirements under AML/CFT rules.

“It’s crucial that firms take their compliance obligations seriously, ensuring that they not only have the right programmes in place, but that these programmes are followed by staff.”

CLSAP NZ chair David Wallace said it accepted the penalty and it had made wide reaching changes over the past two years to improve compliance within the company.

He said the company had appointed a new board and management team, which had completely changed the culture of the company.

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