ASB's $6.73m anti-money laundering fine confirmed by High Court after compliance failures relating to billions of dollars worth of transactions

The Reserve Bank and ASB say the High Court has confirmed a civil penalty of $6.731 million for seven Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT Act) breaches by ASB.

Details of the case were revealed by interest.co.nz in March after a High Court hearing to determine the final penalty. This followed ASB cooperating with a Reserve Bank investigation and admitting to seven breaches of the AML/CFT Act, and the two parties agreeing to jointly recommend a penalty of $6.73 million to the High Court. 

Interest.co.nz's March story revealed about $9.37 billion worth of transactions involving foreign trust customers weren't subject to adequate oversight as a backlog of tens of thousands of alerts from ASB's transaction monitoring system built up, according to a statement of claim from the Reserve Bank.

The Reserve Bank notes this is the highest AML/CFT penalty ever imposed by the Court in New Zealand.

"We accept the Court’s findings and the penalty. In particular, we accept responsibility for shortcomings in our transaction monitoring and customer due diligence systems and processes. We accept we didn’t act fast enough to resolve the issue and I apologise for that," ASB CEO Vittoria Shortt said.

In the court hearing Meredith Connell partner Sam McMullan, representing the Reserve Bank, said $13 million was the maximum available penalty for ASB. The parties had agreed to a starting point of $8.975 million. A 25% discount was set for ASB due to the bank's admissions and co-operation, with the suggested penalty landing at $6.73 million.

Reserve Bank Acting Assistant Governor for Financial Stability Angus McGregor said banks are exposed to a high risk of money laundering and terrorism financing, and transaction monitoring plays a critical role in banks’ AML/CFT programmes.

"In this case, ASB’s transaction monitoring system and AML/CFT programme were inadequate for approximately six years, which is unacceptable," McGregor said.

"Transaction monitoring is a key pillar to detect money laundering and terrorism financing. It is incumbent on banks to ensure their systems and processes are robust and sufficiently recognise and mitigate these risks."

"The AML/CFT Act plays an important part in maintaining and enhancing New Zealand’s international reputation and contributing to public confidence in our financial system. Non-compliance with transaction monitoring and reporting requirements denies New Zealand intelligence agencies crucial time-sensitive information that is needed to detect and deter money laundering and terrorism financing from impacting New Zealand communities," said McGregor.

Shortt said ASB cleared all backlogs of transaction monitoring alerts by February 2024 and have had no backlogs since. 

"We have uplifted, and continue to uplift, our systems and processes to improve our AML/CFT capabilities. We have invested significantly in training our people, expanding our financial crime teams and enhancing the technology that supports our financial crime operations."

"Protecting our customers and the financial system is a core priority for ASB. We remain committed to further strengthening our AML/CFT compliance systems," said Shortt.

The seven breaches of the AML/CFT Act ASB admitted included failures to:

• establish, implement, or maintain an AML/CFT programme relating to customer due diligence requirements;
• establish, implement, or maintain an AML/CFT programme relating to requirements to manage and mitigate the risks of money laundering and terrorism financing;
• establish, implement, or maintain an AML/CFT programme relating to monitoring and managing compliance with ASB’s procedures, policies, and controls;
• adequately conduct ongoing customer due diligence on foreign trust customers;
• report suspicious activities within the time required;
• conduct enhanced customer due diligence; and
• terminate business relationships when required.