Generate KiwiSaver announced last week that it could take over the bulk of AML/CFT reporting responsibilities for the KiwiSaver members advisers introduced to its schemes, provided the advisers met a number of criteria.

Chief executive Henry Tongue said: “If the only reason your adviser business is a reporting entity for AML/CFT is because you act as an intermediary for KiwiSaver then, provided you have appropriate contracts with all your providers, this process may apply.”

Advisers must sign a new agency agreement with their provider. If they deal with more than one KiwiSaver provider, they must sign an agreement with those providers, too.

Once the agreement is signed, they will no longer be a reporting entity required to submit AML returns and be audited, assuming the agreement is signed before June 29.

They will have to file a partial annual return up to the date the agreement is signed. 

The risk would still lie ultimately with the adviser, who would need to make sure agency agreements were appropriate and up-to-date with legislation. Generate recommended advisers get advice on the matter.

The new agreement would stipulate what the provider required the adviser to do as their agent, such as initial customer due diligence and suspicious transaction reporting.

Tongue said the move made sense. “We’re the ones who see the transaction.”

Barry Read, of IDS, said he had audited a lot of financial advisers who were reporting entities but did not receive any client monies and it made sense to offer this relief.

“It always seemed like double up. This just makes sense. Advisers who distribute for a few companies will ask the question – why don’t you do this for us? It wouldn’t surprise me to see more providers do this in future.”

The FMA said it was aware of the move.

“Although this approach may work well to reduce the compliance burden on certain  advisers with AML/CFT obligations, it’s not a one-size-fits-all approach and may not be appropriate for all financial advisers who are reporting entities.  It will depend on their specific circumstances and how they structure it with their product providers.  For example a financial advisory firm may also conduct other financial activities that make them a reporting entity under the AML/CFT Act so this arrangement would not remove their obligations with respect to those financial activities.  The FMA advises reporting entities to seek advice to make sure this type of solution works for them."