Kiwibank gets OK to close money remitter's accounts

Kiwibank said it considered the money remitting business of E-Trans posed too great a risk or burden to it under anti-money laundering rules that came into force in 2013.

Kiwbank has been cleared to close the accounts of E-Trans International Finance because of the risk posed by the money remitter under anti-money laundering legislation, upping pressure on the government for a policy fix to accommodate foreign workers wanting to send funds home.

In the High Court in Auckland, Justice Paul Heath and lay member Professor Martin Richardson upheld Kiwibank's right to close the remitter's accounts and discharged an interim order preventing the bank from doing so, in a judgment issued on May 19.

Justice Heath and Professor Richardson accepted Kiwibank was entitled to terminate its contract with E-Trans on 14 days' notice, and weren't convinced that in doing so there would be a substantial lessening of competition among money remitters.

Kiwibank reviewed its business with E-Trans as part of a wider report focusing on anti-money laundering risks, which ultimately led the bank to terminate its contracts with money remitters to avoid breaching the regulations.

The judgment noted the tension between sound policy to regulate financial markets to limit the risk of serious crime and financing of terrorism, and allowing foreign workers to remit funds home, with a specific government concern about how remittances to the Pacific Islands were "being jeopardised by the reluctance of registered banks to provide banking services to money remitters."

"The nature of the conflict among the public policy goals necessarily gives rise to a degree of sympathy for the plight of both Kiwibank and E-Trans," the judgment said. "But (Kiwibank counsel) Mr Weston is right to submit that resolution of those policy issues is not justiciable. The policy choices to be made are ones for government."

Justice Heath and Professor Richardson put forward two possible solutions: a minister could exempt a bank from reporting requirements in the case of a remitter where that remitter was required to report its own transactions; or there could be guidance given by a supervisor on a case-by-case assessment of the risks posed by a remitter.

"Such guidance would be consistent with views expressed internationally, and by the Reserve Bank and the Minister of Finance in this country," they said.