Citibank NZ warned over money laundering rules, wire transfers

The rule exists to hinder the anonymous use of wire transfers by money launderers and financiers of terrorism. Photo / Getty Images

The Reserve Bank has issued a formal warning to Citibank over wire transfers and anti-money laundering rules.

The Reserve Bank (RBNZ) today said Citibank NZ failed to provide originator information to beneficiary institutions.

Citibank, as an intermediary institution in international wire transfers, was required to so under Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT).

“The requirement exists to hinder the anonymous use of wire transfers by money launderers and financiers of terrorism,” the RBNZ said today.

The warning relates to transactions between January 2017 and July 2020, and between November 2021 and April 2022.

The central bank said failures stemmed from Citibank NZ’s control deficiencies and failure to adequately apply and test control measures relating to automated payment rules.

About 64,000 transfers were affected.

“This meant the banks ultimately receiving those funds were unable to see their true origin,” the RBNZ added.

The failures were not a deliberate attempt to evade Citbank’s 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,” the central bank added.

“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,” RBNZ director of enforcement and resolution Kerry Beaumont said.

“It is vital that all parties involved in wire transfers accurately pass on the originator information they obtain.

“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.”