RBNZ warns on 'blanket' closures of money remitters' accounts

"New Zealand's Reserve Bank yesterday warned banks that "blanket decisions" to close accounts and refuse services to all money transfer services was not the correct way to comply with anti-money laundering laws.

The Big Four banks in Australia, parent companies of the four largest banks in New Zealand, have already moved to unilaterally close all money remitters' accounts, citing obligations under the Australian Anti-Money Laundering and Countering Financing of Terrorism Act.

But in a statement the RBNZ said the remittance industry was an important one and New Zealand banks should not follow the international trend toward "blanket derisking", especially since remittances from New Zealand represented a significant part of many Pacific nations' incomes.

"Money remitters play an important role in providing a specialised financial service that many people wouldn't otherwise access conveniently and affordably," the bank said.

"Some money remitters have recently experienced difficulty maintaining access to banking services" or have completely lost access to banking services," it said.

"Some of them believe that banks are indiscriminately terminating their bank accounts or refusing to open accounts for any new customers in the money remittance business."

The RBNZ warned banks that closing existing accounts or refusing to open new accounts for an entire category of customers (rather than undertaking due diligence on customers who are money remitters) was not what was required under anti-money laundering laws. Instead, banks' obligations under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 required "measured risk management."

"With appropriate systems and controls in place, banks should be able to manage and mitigate the money laundering and terrorism financing risks posed by many money remitters," the statement said.

"If banks are de-risking to avoid rather than manage and mitigate those risks, then that would be inconsistent with the intended effect of the AML/CFT Act."

The RBNZ said while "it seems unlikely", if banks are using blanket de-risking itself as a procedure to manage and mitigate those risks, then the Bank would consider that an inadequate means of complying with their obligations under the AML/CFT Act.