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BFCSA: Commonwealth Bank of Australia may face NZ money laundering problems

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Commonwealth Bank may face NZ money laundering problems

Australian Financial Review Aug 8 2017 10:30 PM

Patrick Durkin

 Australian banks have been wrecking New Zealander’s lives with toxic Interest Only Mortgages and Loan App Fraud since 1996.  BFCSA Members in NZ sent us the evidence years ago.

 

The Commonwealth Bank faces questions from anti-money laundering regulators in New Zealand, after revelations that CBA's New Zealand subsidiary ASB Bank is under scrutiny over the use of its smart ATM machines similar to those exploited by criminals in Australia.

The CBA-owned ASB Bank rolled out a network of smart ATMs in December 2013 which allow its customers to deposit under $10,000 without any identification.

The ATMs operate 24/7 and allow customers to deposit cash instantly into their bank accounts, including on weekends and public holidays. The customers can then transfer funds into other accounts and move them to other financial institution or remit the funds overseas.

While other banks have used similar ATM technology, money laundering experts said other banks had hard limits and oversights, such as ANZ which had a cap of 50 notes and transaction monitoring systems to prevent repeat transactions. The CBA ATMs had a limit of 200 notes or $20,000 and no daily transaction limit which was exploited by the criminals, AUSTRAC claims in court documents.

CBA CEO Ian Narev has admitted the bank "made mistakes" by failing to report the money laundering. In Australia $8.9 billion in cash moved through CBA's smart ATMs before a compulsory risk assessment was undertaken with AUSTRAC alleging 53,700 contraventions of the act.

A spokesman for the Reserve Bank of New Zealand, which supervises their banks for money laundering, said that "smart ATMs will be on the agenda for regular anti-money laundering discussions that we have with our supervised institutions".

Organised crime syndicates, particularly from Malaysia, have exploited the so-called smart ATMs because they allow vast sums of money to be deposited without any face-to-face interaction with bank staff, a risk assessment from the RBNZ warned in April.

"The ease of use and anonymity afforded by these services ... present a high level of ... risk. While RBNZ recognises that this service provides greater customer convenience and quicker deposit of funds the deposit of cash by unidentified persons remains a key vulnerability," the RBNZ update warned.

Leading Australian and New Zealand barrister in financial crime and regulatory cases Gary Hughes said New Zealand's laws carry a similarly explicit legal requirement to assess the risk of the smart ATMs for money laundering before they are rolled out.

"There is a requirement to give direct consideration to any new or developing technologies or products, especially where they might favour anonymity," Mr Hughes said.

"In New Zealand, this is explicit in our legislation, obliging regulated entities to assess the risk of any such technologies before they introduce them, and to put in place any additional measures if needed to mitigate and manage the risk that the anonymous machine element can be exploited."

A spokesperson for ASB bank claimed that its smart ATMs were a different model and used a different operating system to the CBA's.

"ASB has processes and tools in place to ensure compliance to New Zealand's AML regime, including the reporting of suspicious transactions to the New Zealand Police Financial Intelligence Unit," an ASB bank spokesperson said.

Prime target

Money laundering expert Ronald Pol said it was unsurprising the Australian Federal Police had identified professional laundering syndicates from Malaysia that were exploiting weaknesses in CBA's controls. "Criminal enterprises are adept at manipulating gaps in the anti-money laundering regime. When they identify a loophole, they quickly adjust their operations to exploit it," Mr Pol said.

Nathan Lynch, Thomson Reuters' head of financial crime intelligence for Asia-Pacific, said regulators in New Zealand were scrutinising the bank's anti-money laundering controls as it emerged that ASB Bank's smart ATMs had similar vulnerabilities.

"The anti-money laundering laws in New Zealand impose a similar obligation for banks to do a risk assessment when they introduce new technology, such as IDMs," he said.

He claimed that New Zealand regulators would now place pressure on CBA to do an internal review on the controls of its smart teller network.

"The Police Financial Intelligence Unit will want to see a declaration on any reports that may have not been filed. The bank will need to self-disclose any breaches in New Zealand. If it does uncover similar breaches the bank could find itself facing enforcement action on both sides of the Tasman, as the AML obligations are similar in each country," Mr Lynch said.

Government failure

The same day as AUSTRAC launched its CBA case last Thursday, New Zealand expanded its anti-money laundering laws to include lawyers, accountants and real estate agents.

Successive Australian governments have failed to expand our regime to cover the same professions which international bodies like the Financial Action Task Force and Transparency International have slammed.

 

"I think Australian real estate is obviously an attractive destination for capital, both legitimate and illegitimate," ANZ's head of financial crime, Guy Boyd, said about the failure last month.

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