Enforcement action under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 – Westpac Banking Corporation Warning
The Reserve Bank of New Zealand (the Reserve Bank) has reasonable grounds to believe that Westpac Banking Corporation (WBC) has engaged in conduct that constitutes a civil liability act under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (the Act). WBC is required to comply with its obligations under the Act at all times.
WBC, a company registered in New South Wales Australia, provides banking and other financial products and services in Australia and other countries. It carries on business in New Zealand through a branch, having its principal place of business at Westpac on Takutai Square, Auckland, and is a registered bank under the Reserve Bank of New Zealand Act 1989.
WBC, together with Westpac New Zealand Limited (WNZL) and others, are members of the “Westpac New Zealand” Designated Business Group (DBG). The entities serve separate but related functions in New Zealand and share the administration of certain obligations under the Act. WNZL is the lead entity in the Westpac DBG, however all international wire transfers ordered by WNZL customers are conducted through WBC.
WNZL has operational responsibility within the DBG for prescribed transaction reporting (PTR) in respect of all eligible international wire transfers conducted through members of the DBG. WBC relies on WNZL to fulfil its PTR obligation.
On 8 March 2019, WNZL reported to the Reserve Bank that it had identified potential contraventions.
Details of the conduct are as follows:
- WBC designed and configured its PTR systems in a way that failed to detect and report all eligible international wire transfers over the requisite threshold. These inadvertent system deficiencies caused WBC to fail to report all prescribed transactions as required by the Act.
- Between 1 July 2018 and 13 February 2019, WBC failed to submit prescribed transaction reports in respect of 7,792 outgoing international wire transfers, sent by New Zealand corporate entities to overseas recipients, that were equal to or over the reporting threshold.
As a result, during the specified period, WBC failed to comply with sections 48A and 57(1)(da) of the Act.
Section 57(1)(da) of the Act requires a reporting entity’s AML/CFT programme to include adequate and effective procedures, policies and controls for reporting prescribed transactions.
International wire transfers of $1,000 or more are prescribed transactions, as stipulated by section 5 of the Act and regulation 6 of the Anti-Money Laundering and Countering Financing of Terrorism (Prescribed Transactions Reporting) Regulations 2016 (the Regulations).
If an international wire transfer of $1,000 or more is conducted through a reporting entity, a reporting entity must report the transaction as required by section 48A of the Act:
48A Reporting entities to report certain prescribed transactions
(1) Despite any other enactment or rule of law, but subject to any regulations made under section 154, if a person conducts a prescribed transaction through a reporting entity, the reporting entity must (as soon as practicable, but not later than 10 working days after the transaction) report the transaction to the Commissioner in accordance with section 48B.
A reporting entity in a DBG may submit prescribed transaction reports on behalf of another member(s) of the DBG under section 32(1)(d) of the Act. In turn, by section 32(1A), a reporting entity that is a member of a DBG may rely on another member of the DBG to make prescribed transaction reports. Irrespective of these arrangements, by section 32(2), the responsibility of ensuring compliance with the PTR obligation remains with the relevant reporting entity, and not the member of the DBG relied on by that reporting entity.
Contraventions of the PTR regime constitute a civil liability act under section 78(da) of the Act.
The Reserve Bank notes that, since the Westpac DBG identified these issues in February 2019, the Westpac DBG has worked to remediate the underreporting of prescribed transactions and has retrospectively reported the 7,792 outgoing international wire transfers.
The following actions are required to ensure compliance with the Act going forward:
- WBC must review the procedures, policies and controls within its AML/CFT programme for reporting prescribed transactions, including its systems assurance processes, to:
- identify and remediate any gaps and/or deficiencies; and
- ensure that it is able to fulfil the PTR obligation set out in the Act.
- WBC’s review should include, but is not limited to, ensuring that:
- all eligible international wire transfers over the requisite thresholds are detected and reported, irrespective of the message type or types attributed to the transfers; and
- prescribed transaction reports are in the form and contain the information stipulated in section 48B of the Act and Schedule 2 of the Regulations.
- If WBC continues to engage in conduct that constitutes a civil liability act, or does not take the actions required, civil or criminal enforcement action may be taken under the Act.This may result in (but is not limited to) the imposition of –
- Civil penalties of up to $200,000 in the case of an individual and $2 million in the case of a body corporate; and
- Criminal penalties of imprisonment for up to two years or a fine of up to $300,000 in the case of an individual and $5 million in the case of a body corporate.
Please note that issuing this formal warning to WBC does not affect the Reserve Bank’s ability to consider or impose other appropriate sanctions under the Act.