The Reserve Bank noted Citibank's failures were not a deliberate attempt to evade its obligations. Photo: RNZ / Alexander Robertson
The Reserve Bank has issued a formal warning to the New Zealand branch of Citibank under anti-money laundering and counter terrorism financing laws.
The warning relates to wire transfer identity requirements under the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act 2009.
Citibank is one of the world's largest banks and is headquartered in New York.
The Reserve Bank said Citibank NZ failed to provide appropriate originator information, obtained in its role as an intermediary institution in international wire transfers.
The transactions took place between January 2017 and July 2020, and between November 2021 and April 2022.
The Reserve Bank noted Citibank's the failures were not a deliberate attempt to evade its legal obligations under the Act and related to complex legal obligations.
The legal requirement is designed to ensure the identification of the originator of a 'wire transfer' (a transaction carried out by electronic means) and provision of that information throughout the payment chain, the Reserve Bank's statement said. It exists to hinder the anonymous use of wire transfers by money launderers and financiers of terrorism.
The central bank said 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.
On being alerted to the issues, Citibank NZ self-reported the matter, addressed the root causes and had cooperated with the Reserve Bank throughout the investigation, director of enforcement and resolution Kerry Beaumont said in a statement.
"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," Beaumont said.
"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."