The Reserve Bank has filed High Court proceedings against ASB Bank for serious breaches of anti-money laundering laws stretching back to 2019.
The Australian-owned bank has admitted liability for seven separate failures under the Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT Act), with the bank and regulator jointly recommending a $6.73 million penalty.
The breaches of "core requirements", which occurred "from at least" December 2019, include failures to adequately conduct due diligence, report suspicious activities on time under the law, and to maintain adequate compliance programmes.
Reserve Bank acting assistant governor of financial stability Angus McGregor said the action against the Commonwealth Bank subsidiary serves as a warning to the sector.
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"The AML/CFT Act has been in place for well over a decade now and the Reserve Bank expects banks to have the systems and resources in place to be fully compliant with these requirements," McGregor said.
He said when banks fail to meet these requirements, they deny police and intelligence agencies crucial information needed to catch criminals.
"Banks who do not comply increase risk for New Zealanders and our financial system."
ASB did not have proper systems in place to watch for money laundering as directed under the law, failed to do required enhanced checks on high-risk customers, and did not end relationships with certain customers when they were meant to.
The bank's chief executive, Vittoria Shortt said: "Our transaction monitoring and customer due diligence systems and processes had shortcomings, and we did not act fast enough to resolve these. We didn’t get this right and I apologise for that.
"We cleared all backlogs of transaction monitoring alerts by February 2024.
"We have uplifted, and continue to uplift, our processes to improve our AML/CFT capability, including expanding our teams and investing in technology."
The Reserve Bank was not claiming ASB laundered money or funded terrorism itself.
ASB has cooperated with the investigation and admitted to all breaches. A High Court judge will make the final decision on the penalty.
The Reserve Bank emphasised the AML/CFT Act’s purposes, which were to "detect and deter money laundering and terrorism financing; maintain and enhance New Zealand’s international reputation; and contribute to public confidence in the financial system."
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