RBNZ to Step up Anti-Money Laundering Scrutiny; Westpac Warned

(Bloomberg) -- New Zealand’s central bank formally warned Westpac Banking Corp. for failing to report certain transactions as required under anti-money laundering legislation, and signaled increased scrutiny of the processes and controls in place at all local lenders.

Westpac’s New Zealand branch designed and configured its prescribed transaction reporting systems in a way that failed to detect and report all eligible international wire transfers, resulting in it failing to report almost 8,000 corporate transactions to overseas recipients between July 2018 and February 2019, the Reserve Bank said Wednesday in Wellington. Under the law, banks are required to report the transactions to the police financial intelligence unit.

“This formal warning reflects the importance of the prescribed transaction reporting regime in building an intelligence picture across New Zealand’s financial system, and reiterates the seriousness with which we view non-compliance with the Act,” Deputy Governor Geoff Bascand said in a statement. Westpac is required to remedy its failings or could face fines or civil penalties.

Last year, Westpac admitted to breaches of Australia’s anti-money laundering law, and agreed an A$1.3 billion ($960 million) penalty with regulator AUSTRAC. The allegations in Australia prompted the RBNZ to review how banks were meeting New Zealand requirements.

The RBNZ today said a survey of correspondent banking, prescribed transaction reporting, and transaction monitoring of all New Zealand registered banks showed that local lenders “appeared to have adequate processes and controls in relation to correspondent banking due diligence, prescribed transaction reporting and transaction monitoring regarding potential child exploitation.”

The RBNZ said Westpac was found to have satisfactory processes in place notwithstanding its prescribed transaction reporting failings.

Still, the RBNZ concluded that an assessment of the effectiveness of these procedures and controls couldn’t be determined from the survey alone, and going forward this will be covered as part of its statutory on-site inspection program.

“The survey was a useful exercise to better understand current compliance with the Act by registered banks and will inform our more intensive supervisory approach,” Bascand said.

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