The PAA has asked the Financial Markets Authority for guidance on a number of issues relating to AML, including how closely RFAs have to assess the risk of money laundering at their businesses.

PAA professional development manager Jenny Campbell said authorised financial advisers were classed as “reporting entities” under the legislation and had quite clear obligations including having an AML programme and doing a risk assessment of their business.

But she said the rules weren’t so clear for RFAs, who aren’t reporting entities but may still have to perform AML-related tasks, including performing customer due diligence on someone applying for a mortgage.

“AFAs have to do a risk profile; it’s very clearly legislated, but to what extent do RFAs have to look at their businesses?” she said. “Also there’s the whole customer due diligence thing: where does the final responsibility lie, with the adviser or with the lender?”

Campbell said that of RFAs, mortgage brokers were likely to have more interaction with the AML regime than insurance advisers.

“I’d have to say, that [buying insurance] would be a terribly inefficient way for criminals to launder funds,” she said.

And mortgage brokers were grappling with another issue the PAA has asked the FMA for clarification about: the due diligence requirements around family trusts, which are often used to take on mortgages.

“Advisers are quite used to doing due diligence on trustees as they are the ones the loans are documented to,” Campbell said. 

“This takes due diligence to another level; you have to know the beneficiaries of the funds and the source of the funds.”

The PAA will cover AML in the next edition of its “friendly guide” series of publications for advisers and will also be tackling the issue at its road show in a few weeks; Campbell said they hope to have the answers from the regulator by then.