Global terrorism, as reported here last year, has added a heavy bureaucratic burden to New Zealand's (and everywhere else's) financial system.
While most consumers probably have no strong opinion either way on the newly-introduced Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) regulations, they will feel the effects of the rules in numerous irritating interactions with financial intermediaries.
But it's the various players in the financial industry who are copping the full force of the AML/CFT regulations, introduced principally at the behest of the US government.
After a fairly lengthy consultation with the Financial Markets Authority (FMA), the industry, somewhat begrudgingly, is coming to grips with the administrative tasks involved in screening out terrorists from New Zealand's money system.
However, at least one industry body believes the FMA has gone a step too far in interpreting the rule requiring financial advisers to track each "settled" client transaction.
According to Murray Weatherston, head of SIFA (formerly known as the Society of Independent Financial Advisers), the FMA's interpretation, introduced in a 'Frequently Asked Questions' (FAQ) section regarding AML/CFT.
In a press release, SIFA says the "FMA has incorrectly widened the term 'settled by' to include not only transactions 'settled by' but also transactions 'arranged by'".
SIFA, in coalition with other groups, has sought a legal opinion from DLA Phillips Fox which supports the narrower definition of 'settled by'.
Weatherston says the FMA wording amounts to "legislation by FAQ" that will impose an onerous, and useless, reporting burden on the many advisers who don't 'settle' transactions under the generally-understood meaning of the word.
He says there is both a larger philosophical question at stake - whether government or "any of its tentacles" can introduce rules without due process - and a broader industry issue.
"If [the rule] applies to us, then it should also apply to every other AML/CFT reporting entity," Weatherston says.
In its FAQs, the FMA acknowledges the rule is "open to different interpretations" but insists financial advisers should track and report all client transactions even "where no client money or client property goes through [the advisers'] own accounts".
For one year only, though, the regulator will not hassle advisers who don't comply.
"... where advisers have managed their records in good faith over the year on the basis of this interpretation, we confirm that FMA will not take any enforcement action for breach of the obligation to correctly complete the [AML/CFT] annual report," the FMA says in its FAQs.
At any rate, Elaine Campbell, FMA director of compliance, says the rule "only requires an estimate of the number and value of transactions".
Campbell says the regulator may also ease admin requirements by folding the AML/CMT reporting into the other annual compliance document advisers must produce.
While this might hose down the back-office rebellion temporarily, the conflict will no doubt flare up next year.
As Campbell says, the FMA is "looking for a more permanent clarification of this matter in the legislation to be ready for next years' returns".