ASB acknowledges anti-money laundering failures as RBNZ files civil court case; ASB CEO apologises

The Reserve Bank (RBNZ) has filed civil court proceedings against ASB for breaches of core anti-money laundering requirements dating from at least December 2019.

The RBNZ says ASB's non-compliance with the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act stems from failures to:

• establish, implement, or maintain an AML/CFT programme that complied in all respects with the requirements of the AML/CFT Act;
• adequately conduct ongoing customer due diligence;
• report suspicious activities within the timeframe provided in the AML/CFT Act;
• conduct enhanced customer due diligence; and
• terminate business relationships as required by the AML/CFT Act.

ASB has co-operated with the RBNZ and admitted liability for all seven causes of action, with the parties agreeing to jointly recommend a penalty of $6.73 million to the High Court. The final penalty determination, will however, be made by the Court.

In 2021 an agreed penalty of $3.85 million, reached between the RBNZ and TSB over AML/CFT breaches by TSB, was reduced by $355,000, or 9%, by a judge. The TSB case was the first civil proceeding taken by the RBNZ under the AML/CFT Act.

Angus McGregor, RBNZ Acting Assistant Governor of Financial Stability, says the action against ASB is an important reminder that serious non-compliance with the AML/CFT Act is unacceptable. 

"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 says.

"Banks who do not comply increase risk for New Zealanders and our financial system. Non-compliance with account monitoring and reporting requirements denies New Zealand law enforcement and intelligence agencies access to crucial time-sensitive information that is needed to detect and deter criminal activity."

'I apologise'

For its part ASB says it acknowledges and accepts responsibility for breaches of its AML/CFT obligations.

"Banks play a very important role in helping to detect financial crime and safeguarding our financial system. 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," ASB CEO Vittoria Shortt says.

"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 RBNZ isn't alleging ASB was involved in actual money laundering or the financing of terrorism.

In October ASB agreed to pay $135.6 million to settle a class action law suit relating to home and personal loans between 2015 and 2019. Shortt described that as a pragmatic way to settle the matter. Shortt succeeded Barbara Chapman as ASB CEO in February 2018.

From July 2026 the RBNZ's role as an AML/CFT Act supervisor will cease, with the  Department of Internal Affairs taking over as New Zealand's sole supervisor following changes announced by Associate Justice Minister Nicole McKee.

Currently the RBNZ supervises banks, life insurers and non-bank deposit takers. The Financial Markets Authority (FMA) supervises derivatives issuers, brokers and custodians, equity crowd funding platforms, financial advisers, managed investment scheme managers, peer-to-peer lending providers, discretionary investment management services, licensed supervisors, and issuers of securities.

And the DIA currently supervises casinos, lawyers, conveyancers, accountants, real estate agents, sports and racing betting agencies, businesses that provide trust and company services, or trade in high value goods, and other financial service providers that are not covered by the RBNZ or FMA.