Reserve Bank files anti-money laundering court proceedings against The Co-operative Bank, parties suggest $1.425m penalty

The Reserve Bank says it has filed court proceedings against The Co-operative Bank under the Anti-Money Laundering and Countering Financing of Terrorism Act, with the two parties having agreed to jointly recommend a penalty of $1.425 million to the court.

The civil proceedings, filed in the Wellington High Court, relate to three breaches of core requirements under the Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT Act) stemming from at least 2020, the Reserve Bank says.

The Reserve Bank says its claims relate to the bank's failures to:

• ensure all of its transaction monitoring rules were operating correctly;
• conduct adequate assurance activities to ensure the effectiveness of its account and transaction monitoring; and
• maintain adequate records relating to its transaction monitoring and assurance activities, as required by its AML/CFT programme.

As a result, the Reserve Bank says The Co-operative Bank failed to identify higher‑risk transactions and customers, undertake timely enhanced due diligence, and maintain records required by the AML/CFT Act.

Angus McGregor, the Reserve Bank's Acting Assistant Governor of Financial Stability, said The Co-operative Bank has admitted liability for all three causes of action.  

"The parties have agreed to jointly recommend to the Court that a penalty of $1.425 million is appropriate in this case, though the penalty is ultimately for the Court to determine," McGregor says.

The Co-operative Bank says it acknowledges and accepts responsibility for breaches of its AML/CFT Act obligations. It says the Reserve Bank action relates to compliance issues from past practices within its transaction monitoring programme, including assurance over that programme.

"Importantly, there are no allegations that the Bank has been involved in money laundering, terrorist financing or any other criminal activity, or that the non-compliance has resulted in adverse customer impacts, The Co-operative Bank CEO Mark Wilkshire says.

"We have worked constructively with the Reserve Bank throughout this process and have taken steps to strengthen our systems and controls. We are confident that the improvements already taken, and planned for the future, significantly strengthen our compliance in this area."

From July the Department of Internal Affairs (DIA) will become the single AML/CFT supervisor, taking on the existing supervisory roles of the Reserve Bank and Financial Markets Authority. McGregor says the DIA is supportive of the Reserve Bank's action and "will take carriage of the proceeding from 1 July 2026."

McGregor notes it's the second AML/CFT Act civil proceeding the Reserve Bank has filed in the last six months, with the previous case taken against ASB.

"This action again reinforces that prolonged and systemic failures to meet core AML/CFT obligations are serious and unacceptable," McGregor says.

"The Reserve Bank expects all banks to have appropriate systems and resources in place to actively monitor customer accounts and transactions, supported by fit for purpose testing and assurance to fully comply with the requirements of the Act. These measures are essential to identify and mitigate potential money laundering or terrorism financing risks in a timely manner."