Jenee Tibshraeny: NZ Herald Wellington business editor on ASB facing a $6 million dollar fine for breaching anti-money laundering rules

Right now, it's 25 away from 7.

Now, ASB is facing a fine of around $6 million

for breaching anti-money laundering rules.

This is caught the attention of the heralds

Wellington business editor, Jenae Tipstrani,

who's with us. Hello, Jenae.

Hi, Heather.

What a remarkable thing that this has happened to ASB

given that they surely would have all kinds of safe guards

in places, wouldn't they?

Well, you'd think so, because much has been made

of these anti-money laundering and countering

the financing of terrorism laws.

So New Zealand is part of an international regime.

Basically, banks need to make sure that any money they take in,

they need to know exactly where that's coming from,

because they can't be sort of complicit in money laundering

or, you know, that could be like the drug trade

or going and transferring money that's against sanctions.

So, you know, banks have kind of,

the spotlight has been on banks for some years.

It's been so much so that they've sort of blank it,

that's what the industry calls it,

where they've said we're not doing any business

with money remiters or nothing to do with cryptocurrency,

because of these, you know,

because we have to comply with these anti-money laundering rules.

But as it's turned out, the Reserve Bank took ASB to court,

ASB acknowledges, you know,

that it's done the wrong thing by law,

because it hasn't had the right systems in place

since at least 2019.

Wow.

So, you know, there's a raft of things

that didn't have the right compliance program,

didn't do sufficient due diligence,

didn't terminate business relationships as required,

and the money that went through ASB,

that wasn't properly checked,

was, you know, transactions worth about $10 billion.

Oh, why, do we know why they were so sloppy?

Well, that's a good question.

I suppose these systems are expensive and cumbersome.

The industry will say that the act is not fit for purpose,

that it's too conky,

and that it actually, you know,

doesn't support the economy,

because you hear from businesses who say

they have to jump through so many hoops

in order to get a bank to bank them.

So, that's what their argument would be.

The thing that struck me with this is that the penalty is,

$6.7 million isn't a lot of money for a bank.

If you think of breaches that got all the way back to 2019,

and, you know, under an act that is supposedly so heavy-handed,

that it's, you know, caused banks to stop

banking a whole bunch of businesses,

including sort of entire sectors.

So, I think that the question is raises as well,

is the act actually entirely fit for purpose,

and are these penalties large enough to encourage banks

to put the right systems in place,

because, you know, $6 million is not much money for a bank.

Quite, yeah, and you're almost, I'm not saying this is the case,

but you'd almost be incentivised to just take the fine,

so you don't have to actually do all the red tape.

I thought that there was some sort of,

like, I might be imagining it,

but I thought that there was some sort of moves afoot

to maybe have a look at the AML and deal with it.

Am I, am I right?

You're right, there are moves afoot,

and I'm not sure exactly what that would mean for banks.

I think the spotlight has been on banks most heavily,

so under the new rules,

if you're an accountant or lawyer or real estate agent,

you know, you have to make sure that your client's money

is clean, basically.

But where the rubber really hits the road

is where the bank, because the bank transacts the money.

So, my belief is even if the rules are made a bit easier,

the owners are still largely on the bank.

So, I guess for the bank to end up in quarters,

is quite a big deal.

This has only ever happened as well with TSP.

It found itself in court.

I think it was fined about $3 million for its breaches.

It's a bit more money TSP is a smaller bank.

But I think I'm still trying to get my head around

why banks are so risk-averse when the penalty is so low.

Yes.

And the difficulty with this here is to get anyone

to talk to about it is hard,

because all the lawyers in the country,

who have real expertise in this area,

have clients who are banks.

So, it's an issue that the people in the know

are very kind of hesitant to talk about it.

I love that.

Junaid, thank you very much.

Maybe we may never find out.

Junaid, Tip Sharani,

they're all dwelling in business at it.