The Reserve Bank has issued a formal warning to Westpac bank for failing to comply with anti-money laundering rules.
The central bank said Westpac's internal systems failed to detect and report almost 8000 corporate transactions to overseas recipients between July 2018 and February 2019.
The law requires financial service providers to report all overseas transactions worth more than $1000 to the police and the Reserve Bank.
There is no suggestion that Westpac was engaged in anti-money laundering activity.
Geoff Bascand, deputy governor and general manager of financial stability at the RBNZ said: "This formal warning reflects the importance of the prescribed transaction reporting regime in building an intelligence picture across New Zealand's financial system, and reiterates the seriousness with which we view non-compliance with the AML/CFT Act."
A spokesman for Westpac said the bank took these matters very seriously.
"This issue arose from an inadvertent error with our reporting system which is now fixed. Upon identifying the issue we proactively reported it to the Reserve Bank of New Zealand.
"We continue to work with the RBNZ on strengthening our systems further."
The RBNZ has also been surveying all New Zealand banks' prescribed transaction reporting and transaction monitoring in the wake of allegations made by Australia's AML regulator against Westpac in November 2019.
It found that all banks appeared to have adequate processes and controls in relation to correspondent banking due diligence, prescribed transaction reporting and transaction monitoring regarding potential child exploitation.
The RBNZ said Westpac NZ and Westpac Banking Corporation were assessed separately as part of a scheduled statutory onsite inspection. Apart from its prescribed transaction report failing Westpac was found to have satisfactory procedures and controls in place for the other surveyed areas.
But the survey also found that an assessment of the effectiveness of bank procedures and controls could not be determined by survey alone and it would now be covered as part of the RBNZ's site inspection programme.
"The survey was a useful exercise to better understand current compliance with the Act by registered banks and will inform our more intensive supervisory approach," Bascand said.
- Additional reporting RNZ