Sharesies has been very popular and has enabled a generation of young investors to start building wealth. The founders of Sharesies (pictured in 2017) from left to right were: Leighton Roberts, Ben Crotty, Sonya Williams, Brooke Roberts, Martyn Smith and Richard Clark.
Sharesies has been warned of failings in its anti-money laundering controls and is about halfway in the task of correctly identifying nearly 8,000 of its clients.
Financial Markets Authority Te Mana Tātai Hokohoko (FMA) said it had identified issues with Sharesies as part of its ongoing monitoring of compliance with the law against money laundering and terrorist financing.
Anti-money laundering laws are designed to prevent criminals and terrorists from using banks, real estate and other financial mechanisms.
They require companies in the financial sector to put in place systems to identify customers and spot customers and transactions that needed to be reported to authorities.
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The FMA said Sharesies failed to perform identity verification for up to 7,815 customers who had account balances over $ 1,000 as part of standard customer due diligence.
Nor had she obtained information from most of the clients on the nature and purpose of the intended business relationship.
And he had not obtained enough information to determine whether certain customers should be subject to enhanced customer due diligence.
FMA Regulatory Director Liam Mason discusses KiwiSaver’s 2020 Annual Report.
The FMA has established a plan for Sharesies to improve its anti-money laundering systems, which Sharesies has worked on.
This included Sharesies adequately identifying all customers, and asking all of its current customers to show their reasons for using the platform, and modifying its registration process to collect this information in the future.
Sharesies also had to develop and implement a process to complete identity verification at the time of account request, and provide staff training on these processes.
It should also develop a system to identify clients who invest through trusts and, where appropriate, perform enhanced client due diligence, the FMA said.
He must also restrict withdrawals or transfers until such checks are completed.
James Greig, FMA’s Director of Oversight, said: “We welcome the way online investment platforms like Sharesies have opened up the investment landscape in New Zealand, but it is critical that Fast-growing companies ensure that their compliance processes and policies keep pace.
“We made this warning public because the Sharesies tickets appeared to be symptomatic of a business that grew rapidly without ensuring that fully effective processes and controls were in place,” he said.
“Sharesies has built up a significant customer base over a short period of time, and we believe there is a risk that the company will be exposed to money laundering, if it continues with current practices,” he said.
He said the FMA was not alleging Sharesies authorized or permitted money laundering or terrorist financing.
Sharesies president Alison Gerry said the company takes the warning very seriously.
“I want to be clear that the FMA has not found any evidence that money laundering has taken place,” she said.
“What the FMA has identified are the ways in which we need to strengthen our practice of identifying clients. As soon as we became aware of the concerns raised, we immediately put in place a work program to address each of the issues raised. “
The company performed enhanced due diligence on a very small number of clients who have since been identified as a trust, she said.
“Sharesies does not currently endorse or encourage the use of the platform by trusts,” she said.
“The issues raised by the FMA include how Sharesies linked some clients to the different forms of identification they provided during registration,” she said.
The proportion of registered customers who needed a better identity check was less than 2% of the company’s customers, she said.
“Sharesies has been in contact with all of these customers to establish a clearer link between them and their identity documents,” she said.
“More than half of the affected customers have now completed the identification process. “