The Financial Markets Authority (FMA) has issued a formal warning to share trading platform Sharesies for failing to comply with anti-money laundering (AML) rules.
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The FMA found Sharesies did not determine what customers' reasons were for using the platform, did not undertake checks to see if certain users should be subject to greater due diligence, and failed to verify the identity of 7815 customers who had an account balance of more than $1000.
These are standard practices for financial services firms covered by the Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT).
The issues were highlighted in a review of the Sharesies' processes by the FMA and there was no suggestion the company engaged in money laundering activity.
"We have made this warning public because Sharesies' contraventions appeared to be symptomatic of a business that has grown quickly without ensuring fully effective processes and controls were in place for AML and CFT (countering financing of terrorism)," FMA director of supervision James Greig said.
"Sharesies' contraventions appeared to be symptomatic of a business that has grown quickly without ensuring fully effective processes and controls were in place for AML and CFT."
Greig said it did not consider Sharesies' breaches to be deliberate.
James Greig, Financial Markets Authority (FMA) Director of Supervision Photo: Supplied / FMA
The FMA ordered the share trading platform to collect information from all customers to understand why they were using the platform, develop processes to properly verify customers' identities and carry out checks on customers who may be using Sharesies as a trust.
It is also required to restrict withdrawals on affected customers until all these checks are completed.
Sharesies chair Alison Gerry said the company was taking the matter very seriously and had taken steps to address the problems.
These included asking specific questions of customers, using biometrics to substantiate customer identities, and employ tighter controls on people acting as trusts, Gerry said.
"Sharesies does not currently support or encourage use of the platform by trusts," Gerry said.
She said the 7815 customers that needed to have their identities verified represented 2 percent of its total user base.
"Sharesies has been in contact with all of these customers to establish a clearer link between them and their identity documentation," Gerry said.
"More than half of the relevant customers have now completed the identification process."
No customer funds had been put at risk, she said.