FMA Warns Pencarrow Private Equity Management For AML/CFT Record-keeping Failures

The Financial Markets Authority (FMA) - Te Mana Tātai Hokohoko has formally warned Pencarrow Private Equity Management Limited for breaching record-keeping requirements under the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act.

The FMA’s investigation found Pencarrow had systemic failings in its retention of identity and verification records for customers who invested in its Fund V, during the period April to July 2018, in that the records were not readily accessible. The failures also meant Pencarrow was unable to provide records to establish whether it had undertaken sufficient enhanced customer due diligence for six of the sampled customer files.

While the risk of money laundering was low with the customers involved, Pencarrow failed to take its compliance obligations seriously at the time, with the result that its non-compliance impacted:

• its ability to perform ongoing customer due diligence and account monitoring
• independent audits required under the Act, and
• the supervisory and investigative functions of the FMA.

The FMA discovered the issues as part of its routine monitoring of the financial services sector for AML/CFT compliance.

Margot Gatland, FMA Head of Enforcement, said: “Robust and readily accessible records are essential for an entity to fulfil AML/CFT requirements, as firms need to continually monitor their customer base to identify any inconsistencies and report any suspicious activities. Good records also enable third parties such as auditors and Supervisors to review an entity’s compliance effectively and efficiently.”

The FMA’s warning requires Pencarrow to expedite its next independent AML/CFT audit so it is completed within four months of the issuance of the warning (i.e. 5 April 2023). Additionally, the FMA will perform a follow-up monitoring visit with Pencarrow on its Fund VI onboarding to assess compliance.

Pencarrow is a managed investment scheme (MIS) manager that offers funds to wholesale investors. It is a reporting entity to the FMA under the AML/CFT Act but is not licensed by the FMA as it does not offer products or services to retail investors. Pencarrow focuses on funding mid-sized New Zealand businesses.

The FMA acknowledges Pencarrow has accepted responsibility for the record-keeping breaches and Pencarrow has cooperated with the FMA.

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