The Bank of New Zealand appears to have had difficulties in meeting laws meant to prevent money laundering and financing of terrorism, according to reports.
Anti-money laundering laws came into force in New Zealand in 2015. They require banks and other firms that handle public money to report suspicious activity.
Compliance of the law is monitored by the Reserve Bank of New Zealand when it comes to banks, non-bank deposit takers and life insurers.
Leaked documents sent to Sydney Morning Herald investigative journalist Adele Ferguson and shared with its New Zealand media business Stuff highlight issues with compliance at the BNZ and its parent National Australia Bank.
The leaked files state that in April last year the bank’s Australian group risk office reported that a KPMG audit of BNZ found 11 findings that it considered placed BNZ at risk of non-compliance with the AML/CFT Act 2009, according to the report.
However, the documents also show the BNZ was “confident” it would not be caught by the New Zealand authorities and rated the risk of fines as minor, though it worried about the public finding out and its reputation being damaged, Stuff reported.
BNZ acknowledged internally that there were areas of “potential non-compliance” which included account monitoring, suspicious transaction reports, EDD (enhanced due diligence) and politically exposed person screening.
In a statement, a BNZ spokesman said: “BNZ complies with all anti-money laundering and countering financing of terrorism regulation.
“We are extremely vigilant on all matters relating to money-laundering, sanctions and terrorist financing. We constantly review and strengthen our controls to manage a continuously changing regulatory and operating environment.”
The story also reported that BNZ used an internal traffic light system to measure how well it was managing compliance risk and it was on amber for three and a half years.
The BNZ spokesman said it used the traffic light system for internal purposes only to identify areas it believed required work to drive continuous improvement and strengthen compliance settings.
“As part of our efforts to drive continual improvement, we undertook an external review of our systems and processes last year. The review identified a number of findings all of which were resolved by December 2018.”
He said BNZ complied with all anti-money laundering regulation during this time.
A Reserve Bank spokesman said it was aware of the KPMG report and had conducted its own on-site inspection at BNZ since it was completed as part of its business as usual supervision practices.
“These type of reports are common industry practice as all banks are required to review and audit their risk assessment with their AML/CFT programmes every two years under Section 59 of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009.”
The spokesman said the report was covered during the on-site visit with BNZ.
“We are comfortable with BNZ’s approach to AML/CFT compliance and their remediation of the findings from the audit.”