Westpac has hit its second money laundering problem in two years – this time in New Zealand where the country’s central bank, the key financial regulator has issued a formal warning to the bank for failing to report breaches of the country’s anti-money laundering law.
In a statement issued early Wednesday morning, the Reserve Bank of New Zealand said Westpac ‘designed and configured its prescribed transaction reporting (PTR) systems in a way that failed to detect and report all eligible international wire transfers, resulting in it failing to report almost 8000 corporate transactions to overseas recipients between July 2018 and February 2019.”
From what the RBNZ said in its statement, these transactions were picked up after the central bank launched an investigation of NZ financial groups in the wake of the discovery in 2019 in Australia of 23 million breaches of anti-money-laundering laws by Westpac.
Under the NZ anti-money laundering laws, reporting entities such as banks are required to report prescribed transactions (including international wire transfers of $NZ1,000 or more) to the NZ Police’s Financial Intelligence Unit, according to RBNZ Deputy Governor Geoff Bascand.
“This formal warning reflects the importance of the prescribed transaction reporting regime in building an intelligence picture across New Zealand’s financial system, and reiterates the seriousness with which we view non-compliance with the AML/CFT Act,” Mr Bascand said in Wednesday’s statement.
The formal warning to Westpac came as the RBNZ released the findings from its survey of all New Zealand registered banks’ correspondent banking, prescribed transaction reporting, and transaction monitoring.
The survey was launched in the wake of allegations made by AUSTRAC against Westpac in November 2019.
“Based on the survey responses received by the Reserve Bank, all banks surveyed appeared to have adequate processes and controls in relation to correspondent banking due diligence, prescribed transaction reporting and transaction monitoring regarding potential child exploitation.,” the RBNZ said (which means that the Commonwealth Bank, the NAB and ANZ arms in NZ were cleared)
“Westpac New Zealand Limited and Westpac Banking Corporation (The Australian listed parent) were assessed separately as part of a scheduled statutory on-site inspection by the Reserve Bank’s AML/CFT Supervision team. Notwithstanding WBC’s PTR failings, the Westpac entities were also found to have satisfactory procedures and controls in place for the other surveyed areas.
“However, the survey also found that an assessment of the effectiveness of these procedures and controls could not be determined from the survey alone, and going forward this will be covered as part of the Reserve Bank on-site inspection programme.
“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,” Mr Bascand said.
Unlike in Australia where AUSTRAC and Westpac agreed to a $1.3 billion penalty (and a $1 billion capital overlay for the bank was imposed by APRA, the banking and finance regulator), the RBNZ statement did not mention a financial penalty for the NZ subsidiary.
