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29 June 2023

Tiger Brokers (NZ) Limited

Background

Tiger Brokers (NZ) Limited has been subject to regulatory enforcement action by the Financial Markets Authority (FMA) for sustained breaches of New Zealand’s Anti‑Money Laundering and Countering Financing of Terrorism (AML/CFT) Act 2009.

The regulatory action culminated in June 2023, when the Auckland High Court ordered Tiger Brokers (NZ) Limited to pay a pecuniary penalty of $900,000 for non‑compliance with AML/CFT obligations. This followed civil proceedings filed by the FMA in December 2022, alleging multiple failures in the firm’s AML/CFT framework.

The FMA identified four key areas of non‑compliance: failure to conduct appropriate customer due diligence (including standard, enhanced, and additional due diligence), failure to terminate business relationships where due diligence could not be completed, failure to report suspicious activities, and failure to maintain records in accordance with statutory requirements. The regulator assessed these breaches as systemic and significant, noting that record‑keeping failures extended beyond sampled customer files and that records were not readily accessible or convertible into English as required by law.

The enforcement action followed earlier regulatory intervention. In April 2020, the FMA issued a formal warning to Tiger Brokers (NZ) Limited after identifying deficiencies in enhanced and ongoing customer due diligence, verification of customer identification, assessment of source of funds or wealth for high‑risk customers, timely suspicious activity reporting, and identification of politically exposed persons. The firm was required to submit and implement a remediation plan by September 2020, with the warning explicitly signalling the risk of enforcement action for continued non‑compliance.

The FMA concluded that the scale and persistence of the identified issues warranted strong enforcement action, resulting in civil penalty proceedings and the subsequent High Court‑ordered penalty. The case underscores the regulator’s expectation of robust, operationally effective AML/CFT systems and its willingness to pursue significant penalties where non‑compliance is systemic or prolonged.

Timeline

June 2023

The Auckland High Court has ordered Tiger Brokers (NZ) Limited to pay $900,000 for breaching the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act 2009 (the Act), in proceedings brought by the FMA.

December 2022

FMA filed civil High Court proceedings against Tiger Brokers (NZ) Limited for allegedly breaching the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act.

The FMA case alleges four causes of action, relating to Tiger Brokers: 

  1. Failing to conduct customer due diligence (including standard, enhanced and additional customer due diligence on certain clients); 
  2. Failing to terminate an existing business relationship with any customer in respect of whom it was unable to conduct customer due diligence; 
  3. Failing to report suspicious activities; and 
  4. Failing to keep records in accordance with the Act’s requirements. 

The matter will proceed to a penalty hearing before the High Court where the parties will jointly submit that Tiger Brokers should be ordered to pay a pecuniary penalty of $900,000. The amount of any pecuniary penalty will be determined by the Court. 

The proceedings follow the FMA issuing a formal warning to Tiger Brokers in March 2020 for failing to have several adequate AML/CFT protections in place. 

After issuing the warning, the FMA opened an investigation into Tiger Brokers’ compliance with the Act, including obtaining a sample of customer files and other documents required for record-keeping. The FMA concluded the extent of Tiger Brokers’ non-compliance warrants strong enforcement action in the form of civil pecuniary penalty proceedings. 

The FMA considers Tiger Brokers’ record-keeping breaches are systemic and significant as they are not confined to the sample of customer files. The FMA alleges that Tiger Brokers’ records were not readily accessible and readily convertible into English (as required by the Act).  

April 2020

FMA issues a formal warning to NZX-accredited broker Tiger Brokers (NZ) Limited for failing to have several adequate anti-money laundering protections in place.

In the FMA’s view, Tiger Brokers had failed to:

  • adequately conduct enhanced and ongoing customer due diligence where required.
  • adequately verify relevant customer identification documents.
  • obtain adequate source of fund or wealth information relating to high risk customers, and take reasonable steps to verify that information.
  • report suspicious activity to the relevant authorities within three working days after forming a suspicion.
  • take reasonable steps to determine whether a customer or any beneficial owner, is a politically exposed person.

The FMA concluded there were reasonable grounds to believe the business had contravened the Act.

Tiger Brokers must prepare and submit a plan to the regulator before 17 April 2020 describing how and when it will amend the issues to become compliant. It must then complete these actions by 30 September 2020, or it will face enforcement action.