Cash Converters NZ franchise is owned by an ASX-listed company. Photo/Bevan Conley
Four Australian companies which are part of the ASX-listed Cash Converters International business have signed an agreement with Australian regulator Austrac to address shortfalls in the way they manage money laundering risks after an investigation found concerns about how it was meeting its legal obligations.
But the New Zealand arm of the business won’t be subject to the agreement and says it already has appropriate compliance systems in place.
Cash Converters International, which wholly owns the New Zealand franchise, said it had entered into an enforceable undertaking with Austrac through four of its Australian companies which will be required to; complete a remediation acquittal report by April 28, appoint an external auditor by June 30 to assess the implementation of its remediation report and present this report back to Austrac by November 30.
It will also have to provide Austrac with a written report detailing how it plans to respond to any findings of the external auditor by December 18.
Enforceable undertakings are a rare step taken by the regulator. Austrac’s website shows there were only two of these agreements made with companies in 2022 and the prior one to that was in 2016.
An Austrac spokesperson said it had accepted the EU from Cash Converters to uplift its compliance with Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) laws.
“Austrac concerns relate to the adequacy of Cash Converters’ anti-money laundering and counter-terrorism financing programme and the systems and controls required to be implemented in the programme, for example in respect of transaction monitoring and customer due diligence.
“Cash Converters have undertaken to continue their work to improve their AML/CTF compliance including through the appointment of an external auditor to provide assurance on their remediation.”
But the undertaking has only been made by four Australian companies - Cash Converters Personal Finance Pty Ltd, Cash Converters (Cash Advance) Pty Ltd, Cash Converters (Stores) Pty Ltd and Green Light Auto Group Pty Ltd.
The Herald asked Austrac if its investigation spanned the New Zealand arm and if so what it found there but it said that any business’ compliance with anti-money laundering/countering financing of terrorism laws in New Zealand were a matter for the New Zealand regulator.
In New Zealand AML regulation is shared between the Department of Internal Affairs, Reserve Bank and Financial Markets Authority depending on what the business does.
A DIA spokesperson said it was aware of the Austrac investigation of Cash Converters in Australia.
“The department has engaged with Cash Converters in New Zealand about their obligations under money laundering legislation – as we do with many other organisations – but we also note that most Cash Converters operations in NZ are not subject to those requirements.”
That’s because pawnbroking - the main business of Cash Converters NZ - is currently exempt from the AML/CFT Act.
Cash Converters is subject to the law if it engages in lending money or buying or selling certain items for $10,000 or more in cash. But most of its lending and sales are likely to be under that amount.
Erin White, national personal finance manager at Cash Converters New Zealand, said the enforceable undertaking did not apply to New Zealand.
“It only applies to the Australian companies named.”
She said the New Zealand business had appropriate compliance systems in place.
“The New Zealand business has its own compliance programmes, which are managed locally and externally audited to ensure compliance with NZ AML/CFT laws.”
In an ASX statement Cash Converters International managing director Sam Budiselik said it took its anti-money laundering (AML) and countering of financing terrorism (CFT) obligations seriously.
“Cash Converters takes its AML/CTF obligations seriously and over the past two years has undertaken an uplift programme to address shortcomings identified during the course of Austrac’s investigation.
“The uplift has resulted in a significant improvement in the company’s AML/CTF compliance obligations, with the EU representing the final stages in that process, affirming the company’s ongoing commitment to AML/CTF compliance.”
He said Austrac had acknowledged the significant steps taken by Cash Converters and the co-operation of the company.
“Cash Converters is aware of the role financial service providers play in protecting the community from the harm caused by money laundering and terrorism financing.”
Cash Converters is said to be New Zealand’s biggest payday lender and pawn-broking business.
It began franchised operations in New Zealand in 1993.
In 2014 Cash Converters International acquired a 25 per cent stake in the New Zealand enterprise.
In October last year it bought the remaining 75 per cent interest in Cash Converters New Zealand (CCNZ) Master Franchisor for A$15.5 million.
CCNZ Master Franchisor made a before-tax profit of A$3.42 million in the year to June 30 and Cash Converters International said it expected that to grow over future years.
The Cash Converters New Zealand network consists of 22 stores of which 11 are franchised and 11 are owned and operated by the Master Franchisor.