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RBNZ files High Court statement of claim against TSB for 'acknowledged breaches' of the Anti-Money Laundering and Countering Financing of Terrorism Act

RBNZ files High Court statement of claim against TSB for 'acknowledged breaches' of the Anti-Money Laundering and Countering Financing of Terrorism Act

The Reserve Bank (RBNZ) is taking a bank to court for the first time, filing a statement of claim in the High Court against TSB for "acknowledged breaches" of the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act.

In a statement the RBNZ says its civil claim represents an escalated regulatory response to TSB’s non-compliance with aspects of the AML/CFT Act. The regulator isn't, however, alleging that TSB was involved in actual money laundering or the financing of terrorism. 

"TSB has been cooperating with the Reserve Bank in respect of the claim and has acknowledged liability. The Reserve Bank and TSB have filed an agreed statement of facts with the High Court," Deputy Governor and General Manager of Financial Stability Geoff Bascand says.

The RBNZ is seeking pecuniary penalties in relation to four categories of non-compliance:

  • the absence of adequate and effective procedures, policies and controls for monitoring and managing compliance with its AML/CFT programme;
  • the failure to review and maintain TSB’s AML/CFT programme;
  • the failure to conduct a risk assessment in respect of its realty operations;
  • the failure to have regard to certain countries it deals with when reviewing its 2017 risk assessment.

Under the AML/CFT Act the maximum pecuniary penalty for a civil liability is $200,000 for an individual, and $2 million for a body corporate or partnership. It's the first time the RBNZ has taken a bank to court.

Bank's real estate business sold

In terms of its realty operations, TSB sold TSB Real Estate to Bayleys Taranaki last October. Asked whether the sale was related to AML/CFT Act issues raised by the Reserve Bank, a TSB spokeswoman says the sale to Bayleys was completed "to get the best outcomes for its customers and communities." A Reserve Bank spokesman declined to comment on whether the sale was at the behest of the Reserve Bank.

Interest.co.nz reported last July that TSB was "actively remediating" problems with its programme to comply with the AML/CFT Act that were identified by the RBNZ. At that time TSB said civil legal proceedings could stem from discussions with the RBNZ, and that it had made a provision in its accounts to cover a potential liability, but wouldn't specify the size of the provision.

TSB says it has admitted certain breaches of the AML/CFT Act between 2013 and July 2019. These breaches relate to the bank’s AML/CFT risk assessment and compliance programme.

 In a statement TSB Chairman John Kelly says it’s not alleged any money laundering occurred through the bank and customers weren't put at risk.

“TSB acknowledges it has needed to address some areas of AML/CFT compliance and a significant work programme has been in place since 2019 to achieve this,” says Kelly.

“TSB is committed to raising the bar in its risk maturity and compliance management and setting a higher standard going forward. We are extremely pleased with the progress that is being made. We still have work to do, but we now have stronger foundations in place which we’ll continue to build on.”

TSB has been a reporting entity under the AML/CFT Act since it came into force on June 30, 2013. In 2016 TSB received a formal warning from the RBNZ for failure to review and update its risk assessment under section 59 of the AML/CFT Act. Then in 2019 Bascand says the RBNZ identified that TSB continued to show inadequate and ineffective compliance with its AML/CFT obligations.

“We are disappointed that TSB did not respond sufficiently to our initial formal warning. We are now obliged to take this High Court procedure,” Bascand says.

TSB CEO Donna Cooper says the bank is committed to continuing to identify any areas needing attention and implementing effective compliance programmes and processes.

“Over the last two years, uplifting our risk and compliance maturity has been our priority focus. We’ve invested in ensuring we have strong expertise, capability and capacity across our business teams to do this. As a result, we’ve made significant progress in building the right culture and supporting programmes and tools to deliver in this space," Cooper says.

Both the RBNZ and TSB say they won't comment further now the case is before the High Court. The RBNZ supervises banks, non-bank deposit takers such as finance companies, credit unions and building societies, and life insurers for compliance with the AML/CFT Act.

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29 Comments

More f-ing wasteful bullshit around that insane legislation.

This is a huge bonfire for taxpayer money for no gain whatsoever, other than to yet further increase the size and power of an out of control state.

Guarantee whatever the bookkeeping problems are they could have been sorted out without a court case and lawyers, but bureaucrats want the fame and the glory I guess.

God I hate being in the business sector these days (which is why I'm getting out).

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Guess who pays for this?

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I agree - particularly if indeed there were no actual cases of money-laundering detected. So, effectively this is just RBNZ taking an administrative, not a criminal case.

What are they doing about the HSBCs and the other real criminal/complicit money-launders operating in/via NZ?

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Between the two organisations involved, TSB not particularly gangster class as far as I know, this is a disgusting waste of money. Someone in government needs to really look at the draconian, intrusive and moronic way the AML is being implemented in New Zealand and get it under control. It's absurd, and for every freedom loving individual in New Zealand, it's a daily affront.

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I think you will find that they have to implement the Basel standards for banking. And you will be pretty damn happy they do it if you don't want home grown terrorists, child pornography rings etc etc in your country. Banks that don't comply should be made to IMO, the RBNZ is actually doing the right thing (for once). Particularly in this country with the amount of gang activity that we have and are seen as a soft touch.

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Here's a better approach: rather than inconvenience and intrude into lives and business affairs of every single individual in the country, just target the gangs and pornographers.

We have traded our freedom for a little illusory security, and it is never worth it. Not in the long run.

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We simply can't tell the difference when looking at data only who is a gangster and who isn't. Plus the degenerates of the world are really really good at hiding in plain sight.

As a result, we have to implement pretty tough checks and balances. Is it an inconvenience for all those that aren't doing anything wrong? Sure, but I would prefer that than having NZ as a haven for terrorist financing/pornography rings/human trafficking/drug smuggling etc.

You are still free to do things like transfer huge amounts of $$ around, but with supervision and checks. I don't consider this a bad thing and I really don't think it's as bad as you are making out. Claiming something like "I get asked where money is coming from and have to provide evidence when I transfer $100000 somewhere" should not be considered onerous IMO and is not the same as "I aren't free to transfer money".

Maybe if people want to live in a state of total freedom from "government oversight/tyranny", then they can go and create their own utopian libertarian societies and see how that turns out. https://www.vice.com/en/article/bn53b3/atlas-mugged-922-v21n10

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Why don't we vote for government to build us really secure little grey cells for us all to live in, guarded by the army, so we're safe from terrorists and pornographers? They could then issue a UBI in the form of little chits we could all spend at special government stores: if we just live on chits granted by governments, no cash, then the state can finally stamp out all crime.

Or, perhaps you leave so the rest of us free adults could actually go about trying to live in that utopian libertarian society, coz that sounds really great to me.

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I'm all in favour of the legislation but would like to see RBNZ get some real crooks - or maybe that's left to the big guys overseas?

https://www.icij.org/investigations/fincen-files/hsbc-moved-vast-sums-o…

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Our local grown ones probably don't reach that sort of scale, but there are plenty of times we are involved in decent sized ones:
https://www.nzherald.co.nz/nz/nz-police-seize-140m-from-russian-compute…
https://www.rnz.co.nz/news/national/438590/auckland-money-laundering-po…

Most bank systems are set up to auto detect "odd" behaviour and these days they are implementing learning algo's to train the detection systems (at least in one NZ bank I know of). If you have ever had a credit card put on hold, these are the systems that generally do it. The systems also detect odd behaviour like frequent moving of large sums of money between different accounts and different people. Staff are also trained to create alerts if customers change behaviours or something looks dodgy (for instance if someone suddenly starts bringing in sizeable cash deposits). I don't think banks alert the RBNZ, they are only about banking compliance (making sure they have these tools). The banks alert the FMA or the police, I believe, who have specialised units to deal with financial crimes.

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How's that system and 'specialised unit' different from the MO and philosophical rationale of the Stasi in East Berlin, or KGB in Soviet Union? Is it about crime by this stage or the imposition of an authoritarian state? I see little difference.

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You are clearly taking things to the extreme Mark, I aren't sure why. Comparing our FMA or police to the Stasi/KGB is pretty ridiculous to the point of absurd. It's pretty odd behaviour for intelligent, thoughtful, rational people to use logical fallacies to justify their beliefs. If you are doing this and serious, I suggest asking for help. https://www.logicallyfallacious.com/logicalfallacies/Appeal-to-Extremes

For a start, the organisations you refer to had a clear goal of rooting out government detractors while trampling on fundamental human rights. Whereas the goal of the processes/groups in question is to root out illegal and dangerous behaviour by identifying and investigating odd transaction based activity, then linking it to real crime (which in this country is not organising in opposition to the government). Different goals, different outcomes, different levels of surveillance... basically the comparison is absolutely absurd. To believe they are similar is disturbing unless you decide to apply the slippery slope fallacy as well.

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Via the AML and the tax state (look up the OECD's information sharing powers among tax states) all the apparatus is set up in the west for the state to know everything about every individual, including where all their assets are should the state want to seize them, and including the power to freeze an individual's financial life, completely, so they simply cannot live.

That's not acceptable. My financial life is none of the state's business. Nor any other part of my life while I am forced to feed the state and the state does not feed me.

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Hmmm... OK. See that internet that you are on? See those roads you drive on? See that school you were educated in? See those hospitals you arrive at when you have a medical emergency?

That's the problem with the libertarian delusion, they all want the benefits the state provides, but aren't willing to pay for it.

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Two good news stories - well done. Great to see when the law nabs drug criminals. Penalties can't be high enough for them.

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Perhaps the only one who can close their NZ operation and leave NZ?

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Hardly surprising, the legislation was enacted over a decade ago now so there is likely to be little leeway given by the Reserve Bank. $2m won't be consequential of course but it doesn't look good, hopefully this portends an executive level restructuring.

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As someone who works projects / change in banks. This is just going to result in more waste. Pointless risk and compliance types clogging up actual productive behaviour. Still, as long as we keep up the good fight against those damn terrorists...

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What was the breach? Did they fail to freeze Grandma's accounts when her Drivers License expired?

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Donations to Labour have resulted in fears of domestic terror.

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Low-hanging-fruit

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Looks like they're going for the easy.

Pretty sad, I all for a local underdog bank!

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Exactly.

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The law is the law. Follow it or accept the risks of repercussions.

For anyone disliking the AML/CFT regulations, well we have our American friends to thank for effectively foisting this on its global "partners".

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The RBNZ really need to go after the kings of Money Laundering from 2013 to 2019 Westpac (26,000.cases in Australia),BNZ,ASB and ANZ John Keys bank and the person that allow this all to happen under his leader.
Then Key lied about what it was doing to the NZ property market
All these Aussie bank where involved.
Why go after the best bank in NZ voted by the people for get reason.They are honest.
Take auction NZ and show your support for TSB NZ best bank and move to them.
I did 5 years ago. I used to deal with all the Aussie Banks best thing I ever did.

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TSB really are something else. The big fish swim through their small net and Joe Bloggs like myself coming back from UK with a few squids to change could only get NZD1000 max. This was a few years ago and then later sometime in the last two years you had to have an account with them to change from forex to NZD. Not sure about the other way around. So the small fry have to go through a whole lot of hoops for chump change but the big boys get away with it. TSB, as probably do others, take your passport details so can easily track one.

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Sounds like poor management by TSB. I mean, they were given a formal warning way back in 2016 so they've had ample time to get their act together.

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What is, and isn't compliance, with AML is incredibly subjective. And forget TSB, I'm hearing of professional firms failing their two yearly audits (which start around a cost of about $5,000 paid for by their clients (us)) then been offered 'training' by the parasite industry set up around AML to get them up to spec. It's a big, intrusive, wasteful money go round with the unproductive (worse, production killers) clipping the ticket all through, the losers of which are the individuals of New Zealand.

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If RBNZ can do this, then why hasn't the Commerce Commission prosecuted the Auckland City Council for loansharking 20500 times in breach of the Credit Contracts and Consumer Finance Act?

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