A FAP that takes on a former authorized financial adviser with AML/CFT obligations will have to accept those obligations under the new regulatory regime, says David Greenslade, Executive Director of Strategi.
“If a financial adviser is employed by a licensed FAP, then that FAP becomes the AML reporting entity,” he says. “But if the adviser is employed by an authorized body, then it is the authorized body that becomes the AML reporting entity.”
Greenslade says regardless of whether it is the FAP or authorized body that becomes the reporting entity in AML terms, FAP license holders now have an obligation to ensure all their authorized bodies are compliant.
“This will involve identifying who was previously an AFA and whether they were previously captured as a reporting entity,” says Greenslade.
However, Greenslade says any licensed FAP or authorized body should check the quality of advice given by a former AFA before bringing them into the fold.
“It is likely that liability for advice given prior to 15 March 2021 would be the responsibility of the individual who gave that advice at the time,” he says.
“This would apply to the AFA or RFA, and also to the employing entity that owned the client.
It is likely that liability for advice given prior to 15 March 2021 would be the responsibility of the individual who gave that advice at the time…
“The clients are the clients of the FAP, and the FAP engages authorized bodies and financial advisers/nominated representatives to service its clients. If the client ownership has not changed, then the entity which employed the adviser before 15 March is still liable as it is still owning the client now it is a FAP.”
He says the same applies to authorized bodies.
“The issue arises if a FAP has purchased clients off another entity or individual adviser,” says Greenslade. “If a sale and purchase agreement was used, then there should be indemnities and warranties in place to protect the purchaser.”
Strategi Institute is offering help with AML/CFT manuals, templates and training modules, while Strategi Compliance can provide AML audits for FAPs or authorized bodies needing assistance.
“If the authorized bodies have not already done so, they will need to review and amend their AML risk assessment and programme, to reflect their new legal status,” says Greenslade. “We are happy to talk through all this and explain what needs to happen.”