Consilium and FNZ have largely been exonerated for their roles in the Barry Kloogh Ponzi scheme. However, BNZ does not come out quite so well.
The Financial Markets Authority has released a report examining how third parties had operated in regard to Kloogh’s Ponzi scheme.
The regulator says it identified opportunities for custodians to improve how they meet obligations to provide custody reporting to end investors under the former Financial Advisers Act 2008.
“We identified that Consilium did not receive or hold client money or client property on behalf of advisers or their clients, and therefore did not have obligations under the FA Act and was not a reporting entity under the Anti-Money Laundering and Countering Financing of Terrorism laws.
However, the regulator “had concerns around BNZ’s review of transaction behaviour on Kloogh's account.”
“We have provided this information to BNZ's AML/CFT supervisor, the Reserve Bank.
“We found no evidence to suggest that BNZ knew or should have known that Kloogh was operating a Ponzi scheme.”
However, it records that BNZ’s files on Kloogh and his financial planning business were inadequate.
“The profile and account details provided for Kloogh and IEL (his financial planning company) were limited.
“BNZ held information regarding Kloogh’s gross income and employer, and information about IEL was limited to the industry in which it operated and its beneficial owner/controlling person, being Kloogh. The only documentation held on file for both Kloogh and IEL was the Insolvency Notice dated 30 September 2019 in relation to IEL.”
BNZ could not provide:
- copies of account opening forms
- any documents in the customer files for Kloogh and IEL (such as customer onboarding forms including photo identification and certificate of incorporation in relation to IEL)
- internal documents or reports that record BNZ’s understanding of IEL and the nature of that business, and details of insights into the operation of that business.
BNZ’s monitoring system had generated some alerts about transactions.
The bank considered the transactions not to be suspicious.
“In our view, BNZ’s review of the alerts was limited and we consider further enquiries or information could have been sought to better understand the nature of Mr Kloogh’s business and the transactions made,” the FMA says.
The FMA says it has identified and referred to MBIE potential law changes that can be made to improve consumer outcomes.
“If made, these would improve our ability to intervene in similar circumstances and clarify the expectations related to custodians and assurance reports.”
It does not provide any details of the requested changes.
To read the full report click here
https://www.fma.govt.nz/assets/Reports/Lessons-learned-from-the-Barry-Kloogh-Ponzi-scheme.pdf
