BNZ issued warning under anti-money laundering legislation

The Reserve Bank of New Zealand (RBNZ), also known as Te Pūtea Matua, hass isued a formal warning to the Bank of New Zealand (BNZ) under section 80 of the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act 2009.

Under New Zealand’s Anti-Money Laundering and Countering Financing of Terrorism Act 2009, reporting entities are required to report domestic physical cash transactions over NZ$10,000, and international wire transfers over NZ$1,000, to the New Zealand Police’s Financial Intelligence Unit (FIU).

however, RBNZ alleges that the bank failed to report the correct location of roughly 50,000 domestic physical cash transactions in prescribed transaction reports (PTR) between November 2018 and April 2020. 

The cause of the failure to report was said to be a technical coding error, which saw the NAB-owned lender provide incorrect location information for these transactions to the FIU.

The RBNZ said that once BNZ  was alerted to the error, it made efforts to promptly remediate the matter, and has “fully cooperated with the Reserve Bank during the investigation”.

Speaking of the decision to issue the warning, RBNZ deputy governor Christian Hawkesby said the matter highlighted the importance of testing compliance systems.   

“We appreciate that design errors can occur. This reiterates the importance of reporting entities regularly testing and validating the coding for anti-money laundering and countering financing of terrorism systems to ensure they are correctly designed and implemented,” Mr Hawkesby said.

Mr Hawkesby added that the “PTR regime is important for building an intelligence picture across New Zealand’s financial system” and that these coding errors made by BNZ “compromised the quality of the information held by the FIU”. 

“We note that BNZ self-reported this issue to us, and has worked hard to remediate the issue and provide the FIU with the corrected information. BNZ’s ongoing cooperation is appreciated,” Mr Hawkesby said.

Last August, the RBNZ issued a warning to Westpac NZ over a similar failure to report 8,000 prescribed transactions. 

The New Zealand central bank alleged at the time that Westpac NZ’s prescribed transaction reporting systems were developed in a manner that failed to detect and report all relevant international wire transfers. 

Subsequently, almost 8,000 corporate transactions to overseas recipients were not reported between July 2018 and February 2019. 

In September 2020, Westpac reached a $1.3 billion settlement with AUSTRAC over its failure to report over 23 million breaches of anti-money laundering and counterterrorism financing laws. 

[Related: NAB dumped 40k customers over crime, fraud concerns]