The
Bankers Association’s Banking Code, touted as minimum standards for trading
banks, proved to be no more than public relations fluff when a Kiwibank
customer challenged the closure of its account.
Trading banks nationally have been
closing accounts of customers providing international money transfer
services. Banks argue these customers
leave them open to liability for money laundering. E-Trans International challenged Kiwibank’s
actions in closing its operating account.
Through a Kiwibank clearing account, E-Trans provides international
money transfers for clients primarily in China and Hong Kong.
Mr Xiaohua Sun of E-Trans told the High
Court he went to a Kiwibank branch in 2007 when ASB intended to close his
E-Trans clearing account. A staff member
at the counter gave him a copy of the Banking Conduct Code, telling him
Kiwibank complies. Under the Code, banks
are obliged to “act fairly and reasonably … in a consistent and ethical way”. Kiwibank said the rules in the Code do not
overide express terms of customer contracts: E-Trans contract with Kiwibank
allowed the bank to close accounts on 14 days notice without giving a reason. The High Court ruled the Banking Code was not
part of E-Trans contract with Kiwibank.
Counter staff did not have authority to overide the express terms of
Kiwibank’s contracts with customers.
E-Trans
International v. Kiwibank – High Court (19.05.16)
16.085