Reserve Bank Initiates Legal Action Against ASB Bank

The Reserve Bank has initiated proceedings in the High Court against ASB Bank for serious infractions of anti-money laundering laws, with issues dating back to 2019.

The bank, which is owned by Australian interests, has acknowledged its fault in seven distinct failures under the Anti-Money Laundering and Combating the Financing of Terrorism Act (AML/CFT Act). Both the bank and the regulator have suggested a penalty of $6.73 million.

Since at least December 2019, ASB has violated several core requirements, notably by not conducting appropriate due diligence, failing to timely report suspicious activities per the law, and not maintaining a robust compliance framework.

Angus McGregor, the Reserve Bank’s acting deputy governor for financial stability, remarked that the action against the Commonwealth Bank subsidiary serves as a cautionary tale for the broader sector.

“AML/CFT regulations have been in effect for over a decade, and the Reserve Bank expects financial institutions to have adequate systems and resources to comply fully with these standards,” McGregor explained.

He further noted that if banks do not adhere to these regulations, they may fail to provide essential information to law enforcement and intelligence agencies necessary for tackling criminal activities.

“Non-compliance by banks poses risks to New Zealanders and the overall financial system,” he added.

ASB reportedly did not have sufficient monitoring systems for money laundering in place as mandated by law. Additionally, it failed to conduct heightened scrutiny on high-risk clients and did not sever ties with certain customers when required.

The bank’s CEO, Vittoria Short, acknowledged the shortcomings, stating, “Our monitoring and due diligence processes were inadequate, and we did not act swiftly enough to address these issues. We failed in this regard, and we apologize.”

She also noted that all backlogged transaction monitoring alerts would be addressed by February 2024. The bank is committed to improving its AML/CFT capabilities, including expanding its team and investing in technological upgrades.

It’s important to mention that the Reserve Bank does not accuse ASB of personally laundering money or financing terrorism.

ASB cooperated with the investigation and conceded all violations. A High Court judge will ultimately determine the appropriate penalty.

The Reserve Bank highlighted that the goal of the AML/CFT Act is to “detect and deter money laundering and terrorist financing, uphold and improve New Zealand’s international standing, and foster public trust in the financial system.”