TSB Bank has been ordered by the court to pay $3.5 million in civil penalties after it was found to have breached anti-money laundering laws.
The High Court at Wellington today released its decision after a statement of claim filed by the Reserve Bank in May.
The penalties were based on TSB's acceptance that it did not have adequate and effective procedures, policies and controls for monitoring and managing compliance with its AML/CFT programme; review and maintain its AML/CFT programme; conduct a risk assessment in respect of its real estate operations or have regard to certain countries it deals with when reviewing its 2017 risk assessment.
Reserve Bank Deputy Governor Geoff Bascand said the penalties reflected 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."
Bascand said the AML/CFT Act came into effect eight years ago. "We expect firms to be aware of, and to comply with, their obligations."
The case is the first time the Reserve Bank has taken civil proceedings under the AML/CFT Act.
TSB chairman John Kelly said the bank was disappointed to find itself in this position and was pleased that the High Court proceedings were now concluded.
"While it was not alleged any money laundering or financing of terrorism had occurred through the bank and customers have not been put at risk, TSB acknowledged that it needed to address some areas of AML/CFT compliance and a significant work programme has been in place to do this over the past two years."
Kelly said the breaches related to the bank's risk assessment and compliance programme between 2013 and July 2019 and TSB was in a significantly different position now than it was then.
"The bank is committed to raising the bar in its compliance management and risk maturity and we are extremely pleased with the progress that has and continues to be made. There is still work to do, but stronger foundations are now in place, which will continue to be built on."
TSB chief executive Donna Cooper, who took over the role in July 2018, said the bank was continuing to identify areas needing attention and implementing effective compliance programmes and processes.
"Over the past two years, uplifting our risk and compliance maturity has been our number one priority and we've invested in strong expertise and capacity across our business. As a result, we've made significant progress in building the right culture, supporting programmes and tools to meet what's required of us."