The Financial Markets Authority (FMA) recently released a guideline clarifying what entities might be considered to be "issuers of securities and participants in issues" under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act). As explained in previous updates, an entity will have certain reporting obligations and will be subject to the compliance requirements under the AML/CFT Act if it is a "financial institution". A person who, in the ordinary course of business "participate(s) in securities issues and the provision of financial services related to those issues" is deemed to be a "financial institution".

The guideline sets out the FMA's view on what it means to be "participating" in securities issues and/or providing "financial services" relating to those issues and draws on the definitions in the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (FSP Act). The FMA has cast a very broad net, suggesting that all of the following are subject to the AML/CFT Act:

  • Underwriters
  • Financial advisers (institutional and independent)
  • Brokers
  • Trustees and statutory supervisors
  • Fund managers.

Whilst this expansive approach may raise some issues for certain entities when determining their compliance obligations under the AML/CFT Act, the guideline provides helpful clarity for issuers of equity securities who may not otherwise be a financial service provider. The guideline recognises that it is unlikely such an issuer will be treated as a financial institution under the AML/CFT Act. The guideline also states that entities involved in one-off securities issues are unlikely to be within the scope of the AML/CFT Act, as such services would not be in the ordinary course of their business.

Given the significant compliance obligations required under the AML/CFT Act, the guideline serves as a timely reminder that reporting entities should be both aware of, and are on track for, the AML/CFT Act's full implementation on 30 June 2013.

The guideline should be read in conjunction with the "Interpreting the Ordinary Course of Business" guideline released by the anti-money laundering / countering the financing of terrorism supervisors (the Reserve Bank, Financial Markets Authority and Department of Internal Affairs) in September 2011.