ASB, the New Zealand banking subsidiary of a major Australian financial group, is under formal court action from the country’s central bank after admitting it fell short of anti money laundering and counter terrorism financing rules. The case focuses on how the lender monitored customers and reported suspicious activity, a core part of New Zealand’s efforts since the late 2010s to clamp down on financial crime at large institutions.
The Reserve Bank of New Zealand alleges that from at least December 2019 ASB’s compliance program did not meet legal standards, with gaps in customer checks and delays in passing on red flags to authorities. ASB has accepted responsibility for the breaches and agreed to a penalty of about $NZ6.73 million (roughly $5.87 million), subject to approval from the High Court, even though the central bank says there is no claim the lender itself laundered money or financed terrorism. The regulator also says there were cases where ASB continued providing services to higher risk business customers without being fully satisfied those clients were following the law, which underscores how monitoring and escalation processes broke down in practice.
The situation appears to be another warning shot to the wider banking sector that weak controls can carry real legal and financial consequences even without direct evidence of criminal intent. New Zealand’s action against ASB follows several high profile enforcement cases in Australia, where other banks have paid hundreds of millions of dollars in penalties and been forced to upgrade their systems. ASB, which generated about $NZ1.35 billion in cash profit in the last financial year and ranks as New Zealand’s second largest lender by total loans, says it is expanding specialist teams and investing in new technology and that it has cleared its backlog of transaction monitoring alerts by early 2024. How effectively those changes rebuild regulatory trust and reassure customers will likely shape both its reputation and the pace of future enforcement across the region.
