The Financial Markets Authority has warned Sharesies over the online trading platform’s weak anti-money laundering procedures, prompting the rapidly-growing startup to beef up its customer due diligence.
The market watchdog found Sharesies didn’t complete identity verification for as many as 7,815 customers, less than 2% of its client base, before establishing a business relationship and didn’t obtain enough information about its customers. That fell short of the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act.
“We welcome the way online investing platforms like Sharesies have opened up the investing landscape in New Zealand, but it’s essential that fast-growing businesses ensure their compliance processes and policies keep pace,” FMA supervision director James Grieg said in a statement.
“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.”
The regulator said it didn’t think the breaches were deliberate and noted Sharesies was cooperating with the FMA.
Alison Gerry, Sharesies chair, said in a statement the online trading platform took the matter very seriously and immediately started a work programme when the regulator raised its concerns.
“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.”
Gerry said the company had undertaken independent AML/CFT audits since its establishment in 2017, and while the latest report found areas to improve, it considered those weren’t material.
“While Sharesies has seen rapid growth over the last year, we have consistently invested in our compliance function over the years, in terms of both technology and human resources,” she said.
