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24 November 2017

Fullerton Markets

Background

This page outlines a formal warning issued by the Financial Markets Authority (FMA) to Fullerton Markets Limited under Section 80 of the Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT Act).

An FMA inspection found that Fullerton did not have adequate AML/CFT risk assessment or compliance programmes in place, which are core requirements of the AML/CFT Act. These deficiencies undermined the firm’s ability to effectively detect and deter money laundering and terrorism financing risks.

The inspection also identified serious failures in customer due diligence, including non-compliance with the Amended Identity Verification Code of Practice. In particular, Fullerton failed to take reasonable steps to identify clients who were politically exposed persons (PEPs), as required under Section 26 of the AML/CFT Act. The document clarifies that the legal definition applies only to foreign PEPs, not New Zealand domestic PEPs.

As part of the formal warning, the FMA has required Fullerton to undertake a comprehensive remediation programme. This includes developing and implementing compliant AML/CFT risk assessments and programmes, reviewing all customers onboarded since commencement of business, strengthening transaction monitoring, retrospectively reviewing all customer transactions, reporting any suspicious activity to the Financial Intelligence Unit of the New Zealand Police, and conducting a full PEP review using an internationally recognised screening tool.

Overall, the case highlights significant systemic weaknesses in Fullerton’s AML/CFT controls and underscores the FMA’s expectations for robust governance, customer due diligence, and ongoing monitoring within reporting entities.

Timeline

November 2017

We have issued a formal warning to Fullerton Markets Limited (Fullerton) under Section 80 of the Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT Act)

An inspection of Fullerton’s AML/CFT compliance by FMA staff showed that the company did not have in place adequate risk assessment or AML/CFT compliance programmes. These are essential components of complying with the AML/CFT Act. These programmes ensure that firms have robust systems and processes in place to detect and deter money laundering and the financing of terrorism.

Fullerton also failed to carry out customer due diligence in line with the Amended Identity Verification Code of Practice. Fullerton failed to take reasonable steps to fully identity clients who are a politically exposed person, as required under Section 26 of the AML/CFT Act. A politically exposed person (PEP) is an individual who has been entrusted with a prominent public function. The legislation limits this to foreign PEPs and does not include New Zealand domestic PEPs.

Under the warning, Fullerton is required to undertake a series of actions in order to ensure it complies with the law:

  • Prepare and implement an AML/CFT risk assessment to the required standard
  • Prepare and implement an AML/CFT compliance programme to the required standard
  • Review its customer onboarding programme and review all customers onboarded since the start of business.
  • Develop a more appropriate level of transaction monitoring rules. Review all customer transactions since the commencement of business. Any suspicious transactions to be reported to the Finance Intelligence Unit of the NZ Police.
  • Undertake a review of all customers to check if they are a politically exposed person, using an internationally recognised search tool

Related

View the notification of a formal warning issued to Fullerton Markets Limited, FSP477046 ('FML') for purposes of section 80 of Anti-Money Laundering and Countering Financing of Terrorism Act 2009