Court widened discovery against the regulator in $8m AML case
The High Court has ordered the Financial Markets Authority to disclose enforcement documents issued to other reporting entities in its anti-money laundering case against InvestNow.
Associate Judge Skelton delivered the judgment in Financial Markets Authority v InvestNow Saving and Investment Service Limited [2026] NZHC 969 on 17 April 2026, resolving a discovery dispute in proceedings that carry a maximum penalty of $8 million.
The FMA alleged that InvestNow, a New Zealand-based investment platform providing online access to KiwiSaver, managed funds and term deposits from fund managers and banks around the world, breached the Anti-Money Laundering and Countering Financing of Terrorism Act 2009. The regulator pointed to deficiencies in customer due diligence, account monitoring, and the assessment of qualifying transactions, defined in the FMA's statement of claim as a complex, unusually large transaction or unusual pattern of transactions that have no apparent or visible economic or lawful purpose.
The FMA brought five causes of action covering alleged failures to maintain a compliant AML/CFT programme under ss 56 and 57; obtain nature and purpose information under s 17; conduct enhanced customer due diligence under s 22; undertake ongoing customer due diligence and account monitoring under s 31; and terminate business relationships under s 37.
The case stemmed from an onsite review between 1 and 3 June 2022. The FMA said 44 sample customers had engaged in transactions satisfying the criteria for enhanced due diligence under s 22(1)(c), including 32 whose transactions exceeded InvestNow's own internal thresholds, yet InvestNow conducted enhanced due diligence on none of them. Only nine sample customers' transactions, identified in unusual transaction reports, had been reviewed by InvestNow, and 39 customer files contained no written findings or notes explaining why transactions had not been examined. A further 343 customers had changed their first and/or last names after identity verification without triggering ongoing customer due diligence.
The FMA issued a public warning on 30 September 2022, requiring InvestNow to develop and implement an effective process to identify customers requiring enhanced and ongoing CDD, and to conduct that CDD on those customers. InvestNow later provided transaction data covering 1 November 2018 to 29 March 2023, which the FMA used to quantify the extent of the alleged failures. By 29 March 2023, InvestNow had obtained nature and purpose information from 24,290 customers and, between then and 21 July 2023, reported conducting ongoing CDD on 1,175 customers and enhanced CDD on 1,115 customers.
InvestNow denied the breaches, citing a risk-based approach, prior FMA reviews, external audits with no relevant issues, and prompt alignment with what it considered the FMA's "change in approach" in 2022.
The parties agreed tailored discovery was appropriate but disputed two points. The FMA proposed 29 March 2023 for Category 1.1(a)–(f) and 30 September 2022 for remaining categories, and resisted Category 3.3 (formal documents issued to other reporting entities). InvestNow sought 21 October 2024 across all categories.
Associate Judge Skelton ruled for InvestNow on both points. He extended the end date to 21 October 2024, finding it proportionate given the $8 million exposure. He ordered disclosure of Category 3.3, confined to enforcement under Part 3 of the Act against entities similar to InvestNow and not issued to the market.
Supported by expert evidence from AML specialist Martin Dilly that the "open-textured" requirements in sections 17, 22 and 31 are informed by market practice, the judge found source documents should be available as direct evidence. He noted his approach to expert evidence may differ from that in Financial Markets Authority v Booster Investment Management Ltd (2026), but distinguished that case on its specific facts and the FMA's expert evidence there.
