Reserve Bank files High Court claim against TSB

Thursday, 27 May 2021

TSB is facing High Court action for poor risk assessment and compliance. (file photo)

The Reserve Bank of New Zealand has filed a statement of claim in the High Court against TSB for breaches of the Anti-Money Laundering and Countering Financing of Terrorism Act.

The action comes five years after the bank was formally warned for risk assessment and compliance failures.

In a statement released on its website, the Reserve Bank of New Zealand - Te Pūtea Matua said it was not alleged TSB was involved in money laundering or the financing of terrorism.

Rather, the breaches related to the bank’s AML/CFT risk assessment and compliance programme, Reserve Bank's Geoff Bascand said.

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TSB has been cooperating with the Reserve Bank and has acknowledged liability. The Reserve Bank and TSB have filed an agreed statement of facts with the High Court.

As a registered bank, TSB has been a reporting entity under the AML/CFT Act since it came into force on June 30, 2013, but in 2016 the bank was formally warned for failing to comply.

At the time, the Reserve Bank said it had reasonable grounds to believe that between June 30, 2013 and June 9, 2016, the bank was not reviewing and keeping up to date its risk assessment as required under the act.

TSB chief executive Donna Cooper has been working to identify improvements in the banks risk assessment and compliance. (file photo)

This was despite being advised it was required to do so by the Reserve Bank following an on-site review in 2013.

In 2019, the Reserve Bank identified that TSB continued to show inadequate and ineffective compliance with its 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 its programme; the failure to conduct a risk assessment in respect of its realty operations; the failure to have regard to certain countries it deals with when reviewing its 2017 risk assessment.

The maximum penalty for the type of breaches is $2 million.

In a statement, TSB chair John Kelly said the bank acknowledged it has needed to address some areas of compliance and a significant work programme had 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,” he said.

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.

“We will always continue to strive for improvements because we’re committed to delivering great outcomes for our customers, communities and New Zealand,” Cooper said.

Both parties said no further comment would be made as the matter was now before the High Court.