The Financial Markets Authority has opted for a formal warning rather than taking legal action against sharebroking firm Craigs Investment Partners for breaching a section of the Anti-Money Laundering and Countering Financing of Terrorism Act.
In a settlement with the market regulator, Craigs admits it breached the Act by failing to conduct adequate due diligence on a client and then failing to terminate its business relationship with that customer.
In the FMA's view, there were deficiencies with Craig's anti-money laundering compliance programme following the introduction of the new Act in mid-2013 as it didn't have a cohesive process for escalating, monitoring, and managing these issues and ensuring compliance.
Craigs, one of New Zealand's largest investment advisory and management firms, had also not maintained sufficient internal written records in relation to decision making in the customer due diligence process, the FMA says.
Since 2014, Craigs has taken steps to improve its anti-money laundering compliance programme, including a thorough review of its systems and processes and employing more staff in this area.
Craigs has also introduced some initiatives to prevent similar breaches occurring in future and has agreed to appoint an independent party, to be approved by the regulator, to identify any further areas it could improve on. The stockbroker has also agreed to follow any recommendations from that third party within a reasonable period of time, the settlement agreement says.
In return, the regulator has agreed not to take any legal action against Craigs over the breach and that there has now been a final settlement of the issue.
The FMA, under chief executive Rob Everett, has shown a preference for reaching settlements for market misbehaviour which he has said in the past are more cost effective than taking a claim to court and also deliver a more certain outcome.
Craigs was fined $30,000 last year by the New Zealand Markets Disciplinary Tribunal for breaching NZX rules after failing to ensure all retail client orders were entered into NZX's trading system with a common shareholder number used to identify shareholders.