The Co-operative Bank has been ordered to pay a $1.425 million civil penalty for failures in its anti-money laundering controls, following proceedings continued by the Department of Internal Affairs.
The High Court accepted an agreed penalty after the bank admitted breaching requirements under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009.
The breaches involved weaknesses in automated transaction monitoring rules, inadequate testing of those monitoring arrangements and insufficient record-keeping.
Importantly, the regulator did not allege that the bank itself had participated in money laundering or the financing of terrorism.
The Department of Internal Affairs said the bank had cooperated with investigators, admitted the failures and addressed the identified deficiencies.
How the compliance failures emerged
According to interest.co.nz, concerns about the bank's transaction monitoring systems emerged after coding problems were first identified internally in December 2022.
Following an onsite inspection in August 2023, the bank's financial crime team alerted the Reserve Bank to potential problems with some automated monitoring rules.
The Reserve Bank subsequently investigated and commenced legal proceedings in May 2026.
Responsibility for supervising banks under the anti-money laundering legislation transferred from the Reserve Bank to the Department of Internal Affairs on 1 July 2026.
That agency continued the proceedings and secured the agreed penalty.
Justice Christine Grice confirmed the penalty in a High Court judgment.
Interest.co.nz reported that the amount represented nearly three times the bank's approximately $500,000 after-tax profit for the six months ending March 2026.
For the full financial year to March, the bank reported net profit after tax of $6.545 million.
Why transaction monitoring matters
Anti-money laundering requirements place responsibilities on financial institutions to identify, assess and manage risks associated with financial transactions.
Effective monitoring is particularly relevant to payments that may require additional scrutiny, including international transfers, although the supplied reports do not identify overseas remittances as the specific cause of these breaches.
The Department of Internal Affairs' general manager of regulatory services, John Sneyd, said effective compliance systems were necessary to maintain confidence in New Zealand's financial system.
The Co-operative Bank is the third New Zealand bank taken to court over breaches of the legislation, following TSB and ASB.
TSB received a $3.5 million penalty in 2021, while ASB was fined $6.731 million earlier in 2026.
The Co-operative Bank could have faced a maximum penalty of $6 million in this case.
The available reports do not identify individual customers who suffered losses because of the monitoring failures, nor do they establish changes to international transfer services resulting from the judgment.
The decision provides another example of regulators taking court action over weaknesses in banks' financial crime prevention systems.
