Failure to properly set up internal systems to identify possible money laundering cost ASB a $6.7 million fine after Reserve Bank intervention.
The High Court was told of ASB Bank persisting with inadequate software workarounds designed to automatically trigger alerts for suspicious transactions and then being overwhelmed by thousands of ‘false positives,’ many alerts left unexamined for months.
Evidence was given of ASB failing to implement improvements required after routine Reserve Bank audits and delaying purchase of software packages better able to provide monitoring required under the Anti-Money Laundering and Countering Financing of Terrorism Act.
‘Know your customer’ requirements imposed by money-laundering legislation has forced substantial costs on many businesses, particularly financial institutions where the volume and velocity of banking transactions can easily disguise the transfer of ill-gotten gains.
The High Court was told ASB Bank decided in 2012 to use its existing Predator software, designed to detect credit card fraud, as the prime means of detecting potential money laundering.
Predator proved singularly unsuited for this task, despite ASB re-setting parameters within which alerts would be triggered.
Extra staff, and eventually outside contractors, were taken on to follow up on the high volume of alerts generated.
Of some 120,000 Predator alerts involving transactions totalling nearly $12.1 billion, the longest period of time an alert remained unresolved was 1300 calendar days; for more serious high priority alerts, 520 working days.
This led to substantial delays in filing suspicious activity reports with the financial intelligence unit within NZ Police.
As banking industry supervisor, Reserve Bank was also critical of ASB’s limited oversight of transactions through bank accounts of those trusts having a foreign beneficiary; considered high risk as vehicles for money laundering.
Reserve Bank requires these customers to be monitored more frequently and in greater detail.
The High Court confirmed a $6.7 million fine negotiated between Reserve Bank and ASB.
Steps taken by ASB to deal with continued backlogs was patently inadequate and delays in remediation unacceptable, Justice O’Gorman said.
ASB undertook to keep Reserve Bank apprised of improvements to internal procedures.
Reserve Bank v. ASB Bank Ltd – High Court (3.06.26)
16.168