The Financial Markets Authority (FMA) of New Zealand has filed a civil lawsuit against the local subsidiary of the retail trading platform, Tiger Brokers for alleged breaches of rules around anti-money laundering (AML) and countering the financing of terrorism.

FMA Takes Aim at Tiger Brokers for AML, CFT Breaches

According to the official announcement on Wednesday, the financial market supervisor is seeking a pecuniary penalty of NZ$900,000 from Tiger Brokers (NZ) Limited. However, the court will finalize the amount if the allegations are true.

The FMA alleged four AML/CFT rules violations by Tiger Brokers. The trading platform failed to conduct customer due diligence, which includes "standard, enhanced and additional customer due diligence on certain clients." Further, it did not terminate the business relationship with customers for whom it could not conduct due diligence.

"Our case alleges Tiger Brokers failed to appropriately vet customers, respond to activities that should have raised concerns, and maintain records in the manner required by the Act. These are all core obligations for an AML/CFT-reporting entity," said Margot Gatland, FMA's Head of Enforcement.

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Tiger Brokers Suffered From 'Systemic and Significant' Failures

Additionally, Tiger Brokers failed to report suspicious activities and keep records as required by local laws. According to the FMA, the company's record-keeping breaches are "systemic and significant."

"A failure to keep records as required by the AML/CFT Act severely hampers the FMA's ability to monitor compliance and ensure the regime is effective," Gatland said, adding: "New Zealand-based AML/CFT reporting entities cannot outsource compliance obligations to third parties or rely on parent companies overseas without ensuring that they meet compliance obligations under New Zealand law."

The enforcement action against Tiger Brokers came after the FMA issued a formal warning in March 2020 for not having the appropriate AML protections in place. Moreover, the regulator launched an investigation against the broker following the warning.

"This case shows the FMA can respond to misconduct promptly with an intervention, such as a formal warning, but this may not be the end of the matter, and we may escalate the response if we consider it appropriate to do so in the circumstances," added Gatland.