In July 2022, the Reserve Bank of New Zealand (RBNZ) issued a formal warning to Bank of New Zealand (BNZ), citing material failures in its Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) controls. The deficiencies were discovered during a routine supervisory review and included failures in transaction monitoring systems, inadequate customer risk assessments, and poorly documented AML/CFT frameworks.

The RBNZ emphasized that while no financial penalty was imposed, the public nature of the warning was intended to prompt immediate remediation. This event highlights the critical role of documentation, consistency, and risk-based methodology in AML/CFT compliance. It is a sobering reminder to all financial institutions, particularly those with cross-border operations, that regulatory scrutiny is no longer limited to monetary penalties. Reputation damage and operational restrictions can be equally costly.

BNZ’s case underlines a growing trend among regulators to evaluate the effectiveness—not just the existence—of AML/CFT frameworks. This demands ongoing internal audits, independent testing, and executive-level oversight. Financial institutions must also ensure that their transaction monitoring systems are appropriately tuned to flag high-risk behavior and that their staff is trained to understand both regulatory expectations and their roles in meeting them.

For compliance professionals, the BNZ warning is a call to conduct internal assessments and validate that their institutions are not just compliant on paper but effective in practice.

Source:            BNZ issued formal warning under AML/CFT Act
Image Source: Michal Klajban, CC BY-SA 4.0, via Wikimedia Commons