The Co-operative Bank has admitted three breaches of New Zealand’s anti-money laundering rules and agreed jointly with the Reserve Bank that a penalty of $1.425 million should be imposed by the Wellington High Court.
The Reserve Bank confirmed on Thursday morning that it has filed civil proceedings against the bank under the Anti-Money Laundering and Countering Financing of Terrorism Act. The court papers, lodged this week, allege that compliance failures inside the bank’s transaction monitoring programme stretched back to at least 2020.
According to the Reserve Bank, the bank failed on three counts. It did not ensure all of its transaction monitoring rules were actually operating the way they were meant to. It did not carry out adequate assurance checks to confirm that its account monitoring and transaction monitoring were working. And it did not keep the records that the AML/CFT Act requires for that monitoring and assurance work.
The cumulative effect, the Reserve Bank says, was that The Co-operative Bank failed to identify higher-risk transactions and customers when it should have, failed to undertake timely enhanced due diligence on those customers, and failed to maintain the records the law demands.
Angus McGregor, the Reserve Bank’s Acting Assistant Governor of Financial Stability, said the bank had admitted liability for all three causes of action and that the two parties have now agreed to jointly recommend the $1.425 million penalty.
“The parties have agreed to jointly recommend to the Court that a penalty of $1.425 million is appropriate in this case, though the penalty is ultimately for the Court to determine,” McGregor said in a statement reported by interest.co.nz.
The Co-operative Bank has not pushed back on the regulator’s findings. Chief executive Mark Wilkshire said the bank acknowledges and accepts responsibility for the breaches, and that the Reserve Bank action relates to compliance issues from past practices within its transaction monitoring programme, including the assurance over that programme.
The bank was careful to draw a line between compliance failure and actual financial crime. “Importantly, there are no allegations that the Bank has been involved in money laundering, terrorist financing or any other criminal activity, or that the non-compliance has resulted in adverse customer impacts,” Wilkshire said.
That distinction matters. Under the AML/CFT regime, transaction monitoring rules are the back-end software and processes that watch for unusual patterns, things like large round-figure transfers, sudden movements between accounts, payments to or from high-risk jurisdictions, or deliberate structuring to stay below reporting thresholds. When those rules misfire, the bank is meant to catch it through assurance testing, and to keep records showing that the testing happened. The Reserve Bank’s case is that those three layers were not working together as the law requires, even if no specific dirty money is alleged to have moved through the bank as a result.
The Co-operative Bank is one of New Zealand’s smaller registered banks, owned by its customers rather than overseas shareholders. It competes mainly on home loans and personal banking, and member ownership has long been part of its marketing pitch. A public court action over anti-money laundering systems will sting more than it might for one of the big four Australian-owned lenders, because the bank trades heavily on being a different kind of institution.
Penalties of this scale have become more common as the Reserve Bank steps up enforcement of the AML/CFT Act. The High Court ultimately determines the final figure, but where the regulator and the bank both back the same number, the court will generally accept it unless it considers the proposed penalty manifestly inadequate. Wellington courts have signed off several jointly recommended AML penalties in the past two years, and the Reserve Bank has said publicly that it wants to use these cases to pull compliance standards higher across the whole sector.
For Co-operative Bank customers, the immediate practical impact looks limited. The bank says no customers have been adversely affected by the compliance failures, and that it has worked with the Reserve Bank to fix the issues identified during the investigation. The longer-term reputational cost is harder to measure. New Zealand’s banking market is small, customers do move when trust is shaken, and the Reserve Bank has signalled it intends to keep applying public pressure on banks that fall short of their AML/CFT obligations.
The case will now move to the High Court, where a judge will consider whether the $1.425 million penalty is appropriate before any final order is made.
Do you bank with The Co-operative Bank, and does an anti-money laundering compliance failure change how you feel about your bank? Or is this just paperwork, and what really matters is whether your money is safe? Drop your thoughts in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job π
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