Westpac warned for AML failures

Geoff Bascand.

Under the AML/CFT Act, banks are required to report transactions (including international wire transfers of $1,000 or more) to the Police Financial Intelligence Unit, says Reserve Bank deputy governor and general manager of financial stability Geoff Bascand.

He says Westpac set up 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.

“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,” Bascand says.

The formal warning comes as the Reserve Bank releases its 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 Australia’s AML/CFT regulator Australian Transaction Reports and Analysis Centre (AUSTRAC) against Westpac Banking Corporation in November 2019.

However, all banks surveyed appear to have adequate processes and controls in place for correspondent banking due diligence, prescribed transaction reporting and transaction monitoring regarding potential child exploitation.

Westpac New Zealand and Westpac Banking Corporation were assessed separately as part of a scheduled statutory on-site inspection by the Reserve Bank’s AML/CFT supervision team.

Notwithstanding Westpac’s PTR failings, the Westpac entities were also found to have satisfactory procedures and controls in place for the other surveyed areas.

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,” Bascand says.