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Citibank NZ issued formal warning under AML/CFT Act – Reserve Bank

The Reserve Bank of New Zealand – Te Pūtea Matua has issued a formal warning to Citibank N.A. New Zealand Branch (Citibank NZ) relating to the wire transfer identity requirements under the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act 2009.

The Reserve Bank found that Citibank NZ failed to provide originator information, obtained in its capacity as an intermediary institution in international wire transfers, to beneficiary institutions. This is a requirement under the AML/CFT Act, designed to ensure the identification of the originator of a ‘wire transfer’ (i.e. a transaction carried out by electronic means) and provision of that information throughout the payment chain. The requirement exists to hinder the anonymous use of wire transfers by money launderers and financiers of terrorism.

The transactions took place between January 2017 and July 2020, and between November 2021 and April 2022.

The failures stemmed from Citibank NZ’s control deficiencies and failure to adequately apply and test control measures relating to automated payment rules which, for around 64,000 affected transfers, failed to pass on the true identity of the originators. This meant the banks ultimately receiving those funds were unable to see their true origin.

The Reserve Bank notes that the failures were not a deliberate attempt to evade the obligations under the Act and related to complex legal obligations. Upon being alerted to the issues, Citibank NZ self-reported the matter, addressed the root causes and has cooperated with the Reserve Bank throughout the investigation, Director of Enforcement and Resolution Kerry Beaumont says.

“This formal warning to Citibank NZ highlights the importance of payment transparency where there are multiple parties involved in a payment chain and the importance of systems assurance to test systems on an ongoing basis before issues become systemic,” Ms Beaumont says.

“The wire transfer identity requirements are important to mitigate the ML/TF risks posed by international wire transfers. It is vital that all parties involved in wire transfers accurately pass on the originator information they obtain. Citibank NZ did not do so for the affected transfers.”

“We appreciate that system errors can occur which is why we remind reporting entities to regularly test their AML/CFT systems to ensure they are not just correctly designed but operating as designed.”

The Reserve Bank notes that Citibank’s failures have implications on the beneficiary banks of the affected transfers from a PTR compliance perspective. The RBNZ will be in touch with affected reporting entities and the wider sector. Prescribed transaction reporting (PTR), while complex, provides a rich source of financial intelligence to deter money laundering.

In determining our enforcement response for this matter, we applied our Enforcement Principles and Criteria Guidelines, which are available on our website; Enforcement – Reserve Bank of New Zealand – Te Pūtea Matua (rbnz.govt.nz).

The warning was issued under section 80 of the Act, in which the Reserve Bank may issue a formal warning if there are reasonable grounds to believe that a firm has engaged in conduct that constitutes a civil liability act.

 

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