ANZ boss Shayne Elliott calls for Pacific Islands to co-ordinate laws, banking regulation

ANZ’s chief will urge Pacific Island nations to harmonise their regulation and financial crimes laws, as Australia seeks to fend off China’s influence and foster closer regional security and economic ties.

ANZ CEO Shayne Elliott will say differences in financial crime regulations make it increasingly difficult for banks to operate efficiently in the Pacific region. Picture: Dan Peled

ANZ chief Shayne Elliott will urge Pacific Island countries to harmonise their regulation and financial crimes laws to stem a decline in banking services, as Australia seeks to fend off China’s influence and foster closer security and economic ties across the region.

Mr Elliott on Monday will deliver a speech to the Pacific Banking Forum in Brisbane, which will follow comments by Brian Nelson, the US Treasury’s Undersecretary for Terrorism and Financial Intelligence, and a video address by US Treasury Secretary Janet Yellen. The event will be opened by Australia’s assistant treasurer Stephen Jones.

The forum is being hosted by the Albanese government and the US Treasury, and aims to facilitate economic resilience and sustainable banking access across the Pacific, while also countering a push by China to form alliances in the region. It hopes to combat the decline of correspondent banking relationships and the closing of accounts in higher-risk countries in the Pacific, often referred to as de-risking or de-banking.

The event, being attended by regional leaders including Nauru President David Ranibok Adeang and Cook Islands Prime Minister Mark Brown, will also traverse sessions on enabling infrastructure, digital innovation and combating money laundering and terrorism financing.

Mr Elliott’s speech will address the issue of bank de-risking in the Pacific and how ANZ is balancing services in the region with its obligation to deliver shareholder returns.

“The Pacific Island region is difficult because the economies are smaller compared to other markets and doing business in the region can be complex,” he will say.

“Each country has its own laws, regulations, customs and tax. While it’s important that each country charts its own course, this can create costs for businesses that want to operate across the region.”

Mr Elliott will say these costs coupled with pressure on bank returns and disparate regulatory regimes across the region had spurred ANZ to pare its exposure.

“In 2022, we made the difficult decision to exit community banking in American Samoa and Guam to focus on building a more sustainable business in our core Pacific markets.

“In the last five years, we have closed 10 branches across the Pacific region, excluding PNG (Papua New Guinea). This leaves us with a network of 19 branches.”

ANZ, which has operated in the Pacific Islands region for more than 140 years, has a presence in Fiji, PNG, Samoa, Vanuatu, Tonga, Solomon Islands, Timor-Leste, Kiribati and Cook Islands.

Mr Elliott said the bank had more than $5bn of deposits in the Pacific and a loan book of more than $2bn.

His speech will outline that banks will find the Pacific Islands region more attractive if countries take “co-ordinated steps” to reduce costs and operating risks.

“Adopting common laws, implementing consistent regulation, and enhancing regional financial crime efforts will make the Pacific Islands a more attractive place for banks to do business,” Mr Elliott will say.

His speech notes solutions could be more forthcoming if governments, regulators, and banks worked together to bolster the operating climate across the Pacific Islands and ensure it had long-term access to international payments.

ANZ has more than 100 account correspondent bank relationships across the Pacific, including providing clearing services for Pacific currencies and Australian and New Zealand dollar clearing for Pacific banks.

The bank’s network facilitates about 25 per cent of payments into the Pacific, and some 15 per cent of payments going out.

The region was also in focus last year when Westpac shelved a process aimed at selling its Pacific division.

Westpac Fiji and Westpac PNG were retained but that followed the earlier blocking of a deal by PNG’s competition regulator for a divestment to Kina Securities.

Mr Elliott’s speech will also delve into differences in financial crime regulation and reporting requirements across the Pacific Islands, and how banks are navigating the environment.

“Few banks have an appetite to get financial crime wrong and we have seen higher due diligence and expectations from correspondent banks across the globe,” he will say.

“High-cost and high-risk countries that don’t offer scale have become less attractive for banks to serve. While the Pacific is not unique in facing this challenge, it is an area that is badly affected by it.”

Austrac, Australia’s financial crimes regulator, has been highly active and last month warned local banks to be vigilant of suspicious activity from accounts held by international students and temporary migrants, as it called on the industry to clamp down on money mules.

A money mule receives funds from a third party into their bank account and transfers it into another account, typically receiving a commission. Criminal groups are known to target vulnerable community members to act as mules.

Separately, three of four major domestic banks have run afoul of Austrac in the past six years and faced regulatory sanctions.

Commonwealth Bank and Westpac agreed to pay huge fines to Austrac for breaches of anti-money laundering and counter terrorism financing laws –$700m and $1.3bn respectively – while National Australia Bank has endured an Austrac enforceable undertaking.