Banks critical of planned security law

Bank customers may have to present their passports for routine tasks such as changing their address because of the stringent measures in a proposed law targeting money-laundering and terrorism.

Banks yesterday criticised the proposed law, saying the compliance costs could run to more than $350 million and would be passed on to consumers.

The Anti-Money Laundering and Countering Financing of Terrorism Bill will require banks to establish the identity, date of birth and address of customers from sources likely to be a passport or driver's licence.

This would apply to existing customers when they change their business relationship with the bank - a definition so broad the banks fear it could lead to a customer having to update details when they open a new account or refinance their mortgage.

The country's major banks were united yesterday in their criticism of the law being too prescriptive when they appeared before Parliament's foreign affairs and trade select committee.

The Bankers Association gave the example of an elderly woman who dealt with the same bank all her life and was moving into a rest home and wanted her daughter as a signatory.

This scenario could trigger the need for her identity to be verified, but the elderly woman might not have the need for a passport and no longer have a driver's licence.

Under the proposed law, the elderly woman would have five days to find some other form of identity or risk her account being closed, the association said.

Kiwibank said it sent out tens of thousands of "gone no address forms" each year, after customers failed to notify it that they were moving house, which it feared could trigger the "customer due diligence requirements" of the new law. Chief executive Sam Knowles said the requirements were archaic and based on threats of five years ago.

He said technology such as facial recognition would quickly surpass the methods of identification verification in the law.

Mr Knowles said the law could slow down technological advances in banking through "electronic wallets" or giving mobile phones purchasing power.

Westpac general manager (regulatory affairs) Mariette Van Ryn said the measures would result in costs "not to the banks but, needless to say, the customers". She said going back to customers to reconfirm their identity was not just a cost for banks, but would be inconvenient to customers.

"Under this bill, our customers are effectively being treated as if they are high-risk customers.

"We will have lots and lots customers having to come into the branch - old people, young people who prefer using the internet - all having to be re-identified for the most minor changes to their accounts."

The bill will help New Zealand fulfil its international obligations to fight money-laundering.