The Financial Markets Authority has issued a formal warning under the Anti-Money Laundering and Countering Financing of Terrorism Act after a Wellington-based company failed to perform a compulsory audit.

The authority issued the warning to MSL Capital Markets Limited, formerly known as McDouall Stuart, after the firm failed to complete a risk assessment audit by October 31 last year and provide a copy of the report by the end of November.

Under the act, companies must audit their risk assessment programmes every two years, or when requested.

The FMA said independent audits were "an essential component of complying with the act and helped ensure that reporting entities had robust systems and processes in place to detect and deter money laundering and the financing of terrorism".

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MSL had now taken action to undertake the audit and had committed to providing the FMA with a copy of its audit report, the authority said.

FMA spokeswoman Shae Skellern said although formal warnings had been issued under the act before, "this is the first time we've had to publicly issue a warning".

"Despite repeated requests over several months, MSL has failed to perform its audit and provide a copy of the audit report to the FMA.

"Given these circumstances it's appropriate for the FMA to issue a warning."

None of the other non-public warnings related to anti-money laundering and countering financing of terrorism act audit issues, Skellern said.

Firms which did not comply with the act face civil penalties of up to $200,000 in the case of an individual, and $2 million in the case of a body corporate.

Criminal penalties of imprisonment for up to two years or a fine of up to $300,000 for an individual, and $5 million in the case of a body corporate also available.

A spokesman for MSL told BusinessDesk there had been "an oversight and we have to take this on the chin and comply quickly," and that prior to the warning it had engaged auditors to complete the report.

The warning comes after JPMorgan Chase Bank's New Zealand branch was given a formal warning by the Reserve Bank for a four-month period in 2013 when it didn't have appropriate risk assessment measures in place to meet the act.

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The central bank today issued a formal warning to the JPMorgan branch, saying it "has reasonable grounds to believe that for a period of approximately four months in 2013" the lender's risk assessment didn't fully meet all the requirements of the Anti-Money Laundering and Countering Financing of Terrorism Act, it said in a statement last week.

The Reserve Bank, Department of Internal Affairs and Financial Markets Authority officially started monitoring financial institutions under the anti-money laundering regime from June 30, 2013, with an initial focus on monitoring and compliance to ensure firms were able to identify and report suspicious activity.

See the FMA's warning here:

-with BusinessDesk