The Reserve Bank of New Zealand has issued a formal warning to JPMNZ (JP Morgan's branch there) as the supervisor of banks and other reporting entities for compliance with their anti-money-laundering obligations.

The RBNZ says that it has reasonable grounds to believe that for a period of approximately four months in 2013, JPMNZ’s AML/terrorist finance risk assessment did not fully meet all the requirements of section 58(3) Anti-Money Laundering and Countering Financing of Terrorism Act 2009.

Section 58 dictates that, before conducting 'customer due diligence' (i.e 'know your customer' exercises) or establishing an AML programme, a reporting entity must first assess the money-laundering risks that it may reasonably expect to run in the course of its business. Subsection 3 states that the risk assessment must be in writing and:

• identify the risks faced by the reporting entity in the course of its business; and
• describe how the reporting entity will ensure that the assessment remains current; and
• enable the reporting entity to determine the level of risk involved in relation to relevant obligations under the Act and regulations.

The Act requires a reporting entity’s AML/TF programme to be based on its own risk assessment. As a result, the assessment comprises the essential foundation of all AML/TF efforts. The RBNZ concedes, however, that since 2013 JPMNZ has taken the action that JPMNZ considers necessary to ensure that its risk assessment complies with section 58 of the Act.