Westpac warned over AML/CTF breaches in NZ

The Reserve Bank of New Zealand (RBNZ) or Te Pūtea Matua has issued the warning after Westpac’s Kiwi arm failed to report prescribed transactions as required by the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act 2009.

Under the act, reporting entities are required to report prescribed transactions, including international wire transfers of $1,000 or more, to the New Zealand Police’s Financial Intelligence Unit.

According to RBNZ, Westpac’s prescribed transaction reporting systems had been designed and configured in a way that failed to detect and report all eligible international wire transfers.

As a result, almost 8,000 corporate transactions to overseas recipients slipped the required reporting between July 2018 and February 2019.

RBNZ made its formal warning after it conducted a survey into all local banks’ correspondent banking, prescribed transaction reporting and transaction monitoring.

The survey had been launched in the wake of the Westpac and AUSTRAC scandal, which resulted in the major bank copping the largest corporate penalty in Australian history last year.

Westpac was made to pay $1.3 billion over 23 million breaches of Australian AML/CTF laws, which had resulted from system failures, including not reporting international transactions as required.

Heads rolled out at the top level after the scandal aired. Former chief executive Brian Hartzer and longstanding director Ewen Crouch exited the group, while ex-chair Lindsay Maxsted brought forward his retirement.

However, the big four bank landed under further AUSTRAC investigation in June last year after it self-reported additional issues.

RBNZ’s survey into Kiwi banks found they had all appeared to have adequate processes and controls in relation to correspondent banking due diligence, prescribed transaction reporting and transaction monitoring regarding potential child exploitation.

But Westpac had been assessed separately, as part of an on-site inspection by the central bank’s AML/CFT supervision team.

Aside from the prescribed transaction reporting failings, Westpac and its New Zealand entity were found to have satisfactory procedures and controls for the other surveyed areas.

However, the survey also ruled that an assessment of the effectiveness of the measures could not be solely determined from the survey itself, with RBNZ deciding to implement the checks in its on-site inspection program going forward.

“The survey was a useful exercise to better understand current compliance with the act by registered banks and will inform our more intensive supervisory approach,” Geoff Bascand, deputy governor and general manager of financial stability at the Financial Intelligence Unit said.

[Related: New banks must have money-maker: APRA]