CLSA Premium NZ to Pay NZ$770K in Fine for AML Breaches

New Zealand’s Financial market Authority (FMA) announced on Monday that it has received a court's approval to impose a total pecuniary penalty of NZ$770,000 (around $546,676) on CLSA Premium New Zealand Limited (CLSAP NZ) for a breach of anti-Money Laundering Money Laundering Money laundering is a blanket term to describe the process by which criminals disguise the original ownership and proceeds of criminal conduct by making such proceeds appear to be derived from a legitimate source.Money laundering is an issue that traverses countless industries and sectors, which includes the financial services space. Though criminal money may be successfully laundered without the assistance of the financial sector, billions of dollars’ worth of criminally derived money are laund Money laundering is a blanket term to describe the process by which criminals disguise the original ownership and proceeds of criminal conduct by making such proceeds appear to be derived from a legitimate source.Money laundering is an issue that traverses countless industries and sectors, which includes the financial services space. Though criminal money may be successfully laundered without the assistance of the financial sector, billions of dollars’ worth of criminally derived money are laund Read this Term rules.

The Hong Kong-headquartered derivatives broker, which was previously known as KVB Kunlun, was already anticipating the penalty and put HK$5.6 million aside as a provision in the first half of 2021 to cover any fine thrown at it by the Kiwi regulator.

The regulatory proceedings were first brought against the broker in June 2020 under allegations of failing to meet the Obligations Obligations In finance, an obligation is a financial responsibility where the terms of a contract must be met. Should an obligation between parties fail then the party who is at default may face legal action. In this scenario, the guilty party will not only have to agree to pay the set amount to fulfill the contractual arrangement but may also be responsible for covering all legal proceedings cost. Routine payments or outstanding debt of any kind are considered financial obligations, so if someone owes you In finance, an obligation is a financial responsibility where the terms of a contract must be met. Should an obligation between parties fail then the party who is at default may face legal action. In this scenario, the guilty party will not only have to agree to pay the set amount to fulfill the contractual arrangement but may also be responsible for covering all legal proceedings cost. Routine payments or outstanding debt of any kind are considered financial obligations, so if someone owes you Read this Term under the local anti-money laundering and counter financing of terrorism rules (AML/CFT).

Serious Breaches

According to the FMA’s allegations, the breaches covered a total amount of NZ$49.5 million in transactions, out of which NZ$40 million were deposits from only two clients. The due diligence failure on the part of the brokerage was tied to 12 transactions. In addition, it failed to keep records of these transactions which is mandatory under the AML/CFT Act.

Initially, the regulator flagged breaches in the practices of CLSA in 2014 and identified further lapses in 2018 even after the broker had made improvements.

“Taken together these features suggest that KVB’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,” the Judge stated.

“If the extremely high-value nature of two of the transactions (totaling NZD 40.8m) is added to the mix, then there is a clear inference that CDD requirements were subordinated to the continuation of KVB’s relationship with high worth customers.”

CLSA had already admitted to the breaches in May but disagreed with the FMA on the penalty amount, which could be around NZ$7 million. Though the regulator approached the Auckland High Court in July asking for a NZ$1.5 million in fines, which could be reduced to NZ$1.2 million after discounts, the broker was adamant on paying only NZ$420,000.

“We welcome this ruling as it sends a strong message that there are serious consequences for firms that choose to prioritize profit over requirements under the AML/CFT regime,” said Karen Chang, FMA Head of Enforcement.