New Zealand’s central bank slaps NAB with formal warning over compliance reporting

National Australia Bank-owned BNZ hit with a formal warning for botching the reporting of 50,000 transactions across the Tasman.

NAB’s NZ division was issued with a formal compliance warning, just months after the bank dodged a financial penalty from Austrac. Picture: Hollie Adams/The Australian

New Zealand’s central bank has hit National Australia Bank-owned BNZ with a formal warning for botching the reporting of 50,000 transactions, as required under anti-money laundering and counter terrorism financing law.

The Reserve Bank of New Zealand on Friday said it had issued the formal warning to BNZ and reminded other market participants of their obligations under the relevant legislation. The warning was linked to BNZ failing to report the correct location for the domestic physical cash transactions in prescribed transaction reports between November 2018 and April 2020.

Anti-money laundering and counter terrorism financing regulations have also been sore point for banks in Australia in recent years, with Westpac paying a record $1.3bn fine to the financial crimes regulator in 2020 and Commonwealth Bank forking out a $700m penalty in 2018. Antiquated systems and poor monitoring of transactions were largely to blame for the huge fines.

NAB in May dodged a financial penalty from Austrac, but entered an enforceable undertaking that mandated it to improve transaction controls by December 2024 – or face consequences.

That undertaking stipulates that NAB must deliver a sweeping remedial action plan and a host of improvements to its anti-money laundering and counter terrorism financing programs.

Austrac identified noncompliance in several compliance assessments, while NAB also self-disclosed noncompliance. The matters included the bank not properly conducting identity checks and due diligence of customers.

The RBNZ on Friday said NAB’s unit across the Tasman, BNZ, identified the cause of the reporting failure as a “technical coding error”, which saw the bank provide incorrect location information for the 50,000 transactions to the Police Financial Intelligence Unit.

“Upon being alerted to the error in its reporting, BNZ promptly remediated the matter, and has fully co-operated with the Reserve Bank during the investigation,” the RBNZ’s statement said.

Deputy RBNZ governor Christian Hawkesby said: “We appreciate that design errors can occur. This reiterates the importance of reporting entities regularly testing and validating the coding for AML/CFT systems to ensure they are correctly designed and implemented.

“The PTR (prescribed transaction reports) regime is important for building an intelligence picture across New Zealand’s financial system. Unfortunately, these coding errors compromised the quality of the information held by the FIU. We note that BNZ self-reported this issue to us, and has worked hard to remediate the issue and provide the FIU with the corrected information. BNZ’s ongoing co-operation is appreciated.”

A BNZ spokeswoman said the bank became aware of a “technical coding issue” in August 2020 which assigned incorrect location information to prescribed transaction reports.

“We reported this to the Reserve Bank and set about fixing the issue immediately. We also immediately began working with the authorities to provide the corrected information as quickly as possible.

“BNZ takes its focus on anti-money laundering and countering financing of terrorism compliance very seriously. We are continuously reviewing our processes and procedures, working with regulators and other authorities, and investing heavily in this area to build our capability and make ongoing performance improvements,” they said.