The Reserve Bank has taken TSB Bank to court over its failure to comply with laws intended to combat money laundering and terrorism financing.
TSB has admitted the breaches, the Reserve Bank calling its move "an escalated regulatory response to TSB's non-compliance with aspects" of the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act 2009.
The specific section of the Act TSB breached came into force in 2013, requiring "financial institutions, casinos, virtual assets service providers, accountants, lawyers, conveyancers and high-value dealers to detect and deter money laundering and terrorism financing", according to the Department of Internal Affairs.
TSB was told in 2019 it "continued to show inadequate and ineffective compliance with its AML/CFT obligations", the Reserve Bank said.
"We are disappointed that TSB did not respond sufficiently to our initial formal warning. We are now obliged to take this High Court procedure," said general manager of financial stability Geoff Bascand.
TSB itself wasn't involved in any money laundering or the financing of terrorism, Bascand said.
A statement of facts agreed by TSB and the Reserve Bank has been filed with the High Court.
The latter is seeking pecuniary penalties over TSB's:
- "absence of adequate and effective procedures, policies and controls for monitoring and managing compliance with its AML/CFT programme"
- failure to review and maintain its AML/CFT programme
- failure to conduct a risk assessment in respect of its realty operations
- and failure to have regard to certain countries it deals with when reviewing its 2017 risk assessment.
TSB chair John Kelly told Newshub the breaches happened between 2013 and 2019.
"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," he said.
"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."
Chief executive Donna Cooper said the bank has spent the last two years "uplifting our risk and compliance maturity".
"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.
"We will always continue to strive for improvements because we're committed to delivering great outcomes for our customers, communities and New Zealand."
Neither TSB or the Reserve Bank would comment further, saying the matter is now before the court.
