The Financial Markets Authority says it’s seeing an increase in fraudulent activity by financial advisers, especially when it comes to insurance and mortgages

The country’s financial markets regulator says under current weaker economic conditions, it’s seeing an increase in fraudulent activity by financial advisers, especially when it comes to insurance and mortgages. 

The growing number of suspected mortgage fraud cases being reported to the Financial Markets Authority (FMA) has alarmed the regulator, so much so that the FMA has sent a letter to the chief executives of banks and non-bank deposit takers, KiwiSaver providers, industry associations and other regulators.

As for suspected misconduct and/or fraud relating to insurance, the FMA says in an Official Information Act (OIA) response obtained by interest.co.nz that it had received complaints and information from third parties, alleging some financial advisers and/or financial advice providers (FAP) submitted life insurance policy applications to insurance companies on behalf of people who don’t exist, for monetary gain. 

The FMA’s executive director for response and enforcement Louise Unger says; “the practice of submitting insurance applications for people who do not exist is known as ‘tombstoning’”. 

Cases alleging fraudulent and misleading conduct in relation to insurance have also become more serious and complex in nature compared to previous years, according to the FMA.

“While these instances are the exception rather than the norm, the severity of the conduct makes this a priority for the FMA to address," Unger says. 

The numbers

Here’s the breakdown of cases alleging fraud and misleading conduct in relation to insurance: 

In full-year (FY) 2021/2022, the FMA had eight cases connected to alleged fraudulent and misleading conduct related to the sale of insurance products. Three of those were fraud cases.

FY 2022/2023 three cases. Of these, two were alleged fraud cases involving the same financial adviser.

FY 2023/2024 two cases. 

FY2024/2025 it had five cases, including four alleged fraud cases. Two of those alleged fraud cases involved the same financial director who is also the sole director of a FAP. 

The alleged misconduct and/or fraud occurred throughout New Zealand. 

‘A priority for the FMA to address’

On Wednesday, the FMA announced it had cancelled Les Vela Limited’s (trading as Wise Insurance) FAP licence after it was alleged the adviser applied for health and life insurance for non-existent people to receive commission payments. 

“It has also directed the Registrar of Financial Service Providers to de-register financial adviser and Les Vela Limited’s sole director and shareholder, Le Zhou (also known as Eric), from the financial services providers register (FSPR), and prevent his re-registration for five years,” the FMA says. 

After receiving notification from the impacted insurer, the FMA says it investigated 15 insurance policy applications submitted by Zhou on behalf of 27 non-existent individuals. This resulted in commissions paid to Zhou totalling $260,937.

The FMA says: “Financial advisers play an important role in helping New Zealanders grow their retirement savings and investments, source insurance and mortgages, protect their income and assets and support overall financial well-being."

“It is important for financial advisers to act ethically to maintain trust and uphold the integrity of the sector, which Mr Zhou has failed to do.”

In addition to notifying the FMA, financial services providers are able to report concerning financial adviser conduct to the Police given such conduct may constitute a criminal offence, the regulator says. 

“In this case, the Police arrested and charged the North Shore man in July 2025. He faces three representative charges of forgery in the North Shore District Court, reappearing in October.”

Acting Detective Senior Sergeant Ben Bergin, from the Waitematā Financial Crime Team says officers are continuing to see an increase in people using their employment or access to systems to commit offending.

“Abusing these systems for personal gain is a criminal offence, and Police are continuing to hold offenders to account.”