RBNZ takes legal action against TSB Bank over money-laundering law breaches

The Reserve Bank is taking TSB Bank to court. Photo / File

The Reserve Bank is taking TSB Bank to court over breaches of the Anti-money Laundering and Countering Financing of Terrorism Act which the bank has acknowledged.

The banking regulator said it had filed a statement of claim in the High Court against the bank which was an escalated response to TSB's non-compliance with the law.

Geoff Bascand, RBNZ deputy governor and general manager of financial stability, said it is not alleged that TSB was involved in money laundering or financing of terrorism.

Bascand said TSB had been co-operating with the Reserve Bank in respect of the claim and had acknowledged liability and the Reserve Bank and TSB had filed an agreed statement of facts with the High Court.

The AML/CFT Act came into force for banks on June 30, 2013 and in 2016 TSB received a formal warning from the RBNZ for failure to comply.

Three years later the RBNZ found that the bank continued to show inadequate and ineffective compliance with its AML/CFT obligations.

"We are disappointed that TSB did not respond sufficiently to our initial formal warning. We are now obliged to take this High Court procedure," Bascand said.

The Reserve Bank is seeking pecuniary penalties in respect of four categories of non-compliance: the absence of adequate and effective procedures, policies and controls for monitoring and managing compliance with its AML/CFT programme; the failure to review and maintain TSB's AML/CFT programme; the failure to conduct a risk assessment in respect of its realty operations and the failure to have regard to certain countries it deals with when reviewing its 2017 risk assessment.

In a statement TSB said it was continuing to work with the Reserve Bank in relation to acknowledged breaches of the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act.

TSB chairman John Kelly said it acknowledged it has needed to address some areas of AML/CFT compliance and a significant work programme has been in place since 2019 to achieve this.

"TSB is committed to raising the bar in its risk maturity and compliance management and setting a higher standard going forward.

"We are extremely pleased with the progress that is being made. We still have work to do, but we now have stronger foundations in place which we'll continue to build on."

TSB chief executive Donna Cooper, who took over the role in July 2018, said the bank was committed to continuing to identify any areas needing attention and implementing effective compliance programmes and processes going forward.

"Over the last two years, uplifting our risk and compliance maturity has been our priority focus. We've invested in ensuring we have strong expertise, capability and capacity across our business teams to do this.

"As a result, we've made significant progress in building the right culture and supporting programmes and tools to deliver in this space."