AUCKLAND – The Co-operative Bank has admitted liability for systemic failures in its anti-money laundering and countering financing of terrorism (AML/CFT) protocols, leading to a recommended penalty of $1.425 million.
The enforcement action by the Reserve Bank of New Zealand (RBNZ) highlights a tightening of compliance standards across the nation’s financial services sector as the country works to align with international benchmarks set by the Financial Action Task Force.
The bank has accepted responsibility for three causes of action, acknowledging that its transaction monitoring programs failed to meet mandatory regulatory standards and did not adequately detect or report potentially suspicious activity.
Regulatory Enforcement and Compliance
The RBNZ indicated that the action was a response to prolonged failures in core AML obligations, which the regulator described as “serious and unacceptable.” The case has been brought under New Zealand’s Anti-Money Laundering and Countering Financing of Terrorism Act 2009, which sets out risk-based requirements for banks and other reporting entities, including robust customer due diligence and effective, ongoing transaction monitoring.
McGregor, representing the RBNZ, stated that the enforcement response promotes the AML/CFT Act’s purposes, which are to detect and deter money laundering and the financing of terrorism; maintain and enhance New Zealand’s international reputation; and contribute to public confidence in the financial system.
“The RBNZ expects all banks to have appropriate systems and resources in place to actively monitor customer accounts and transactions, supported by fit-for-purpose testing and assurance to fully comply with the requirements of the act.”
The regulator added that these measures are essential to identify and mitigate potential money laundering or terrorism financing risks in a timely manner, particularly as criminal networks increasingly exploit digital channels and cross-border payment systems.
Corporate Governance and Financial Impact
The Co-operative Bank, a customer-owned institution with a relatively small share of the domestic banking market, has already integrated the potential financial hit into its long-term planning. The bank has made a provision for the potential penalty in its 2026 financial statements, signalling to depositors and members that it expects to absorb the cost without disrupting day-to-day operations.
Chief Executive Mark Wilkshire acknowledged the shortcomings of the bank’s previous oversight mechanisms and framed the enforcement action as a catalyst for broader governance reforms.
“We acknowledge that aspects of our past transaction monitoring programme did not meet the required standards,” Wilkshire said. “We have worked constructively with the Reserve Bank throughout this process and have taken steps to strengthen our systems and controls.”
Those steps include upgrades to monitoring technology, additional specialist staffing, and enhanced board-level reporting on financial crime risk, according to the bank. Wilkshire further stated that the bank is confident that the improvements already taken, and planned for the future, significantly strengthen its compliance in this area and better align it with international best practice.
Supervisory Transition
The legal proceedings occur during a broader shift in New Zealand’s regulatory architecture. On July 1, 2026, the Department of Internal Affairs (DIA) will become the single AML/CFT supervisor for all reporting entities in the country, consolidating responsibilities that currently sit across multiple agencies and aiming to deliver more consistent enforcement.
The current status of the enforcement action involves:
- Recommended penalty: $1.425 million, jointly proposed to the court by the RBNZ and The Co-operative Bank
- Liability: Admitted by the bank across all three causes of action, removing the need for a contested hearing on the facts
- Supervisory handover: The DIA is expected to assume responsibility for the proceeding from July 1, 2026, as part of its new mandate
The matter will now proceed through the High Court, which holds the final authority to determine the appropriate penalty and any ancillary orders. The outcome will be closely watched by directors and compliance officers across the sector as an indicator of how New Zealand’s evolving AML regime will be enforced in practice.