High Court hits TSB Bank with $3.5m penalty for AML/CFT Act violations

The decision was made in the first civil proceedings the Reserve Bank of NZ undertook under the Act

High Court hits TSB Bank with $3.5m penalty for AML/CFT Act violations

The High Court has imposed a $3.5m civil penalty on TSB Bank for violations of the AML/CFT Act following the filing of a statement of claim by the Reserve Bank of New Zealand (Te Pūtea Matua) last May.

“The penalty reflects TSB’s failure to comply with fundamental elements of the AML/CFT Act. While TSB has now embarked on a remediation programme, these proceedings were an escalated regulatory response by the Reserve Bank to ongoing non-compliance by TSB following a formal warning issued to TSB in 2016,” explained Geoff Bascand, deputy governor and general manager of financial stability at the Reserve Bank.

The Reserve Bank added that the ruling, which was made in the first civil proceedings the bank undertook under the AML/CFT Act, “provides helpful guidance for future cases.”

“In particular, the court accepted the parties’ submission that TSB’s failure to respond appropriately to a formal warning issued in 2016 was an aggravating factor. The judgment also provides guidance on the appropriate level of discount in cases where breaches are admitted,” the bank said.

The Reserve Bank’s claim had been backed up by a statement of facts that TSB Bank was in agreement with. A joint submission was also filed regarding the appropriate penalty.

The court ordered the $3.5m penalty due to TSB Bank’s acknowledged failure to comply with the following legal requirements in accordance with the Act:

  • to have adequate and effective procedures, policies and controls for monitoring and managing compliance with its AML/CFT programme
  • to review and maintain its AML/CFT programme
  • to conduct a risk assessment in respect of its real estate operations
  • to have regard to certain countries it deals with when reviewing its 2017 risk assessment

“The AML/CFT Act came into effect eight years ago and we expect firms to be aware of, and to comply with, their obligations,” Bascand said.

Although it was charged with a failure to comply with the Act, TSB Bank was not involved in money laundering or terrorism financing.

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