ANZ Chief Proposes Standardising AFC Processes to Boost Pacific Banking Viability

ANZ's chief Shayne Elliott has proposed that banks in the Pacific region could potentially standardise Anti-Financial Crime (AFC) processes and services to reduce costs without compromising risk protocols. "Could we share, to lower the cost, the way we run things like AML and KYC?" Elliott inquired, referring to anti-money laundering and know-your-customer background checks. He emphasized that such initiatives must span multiple markets to be advantageous.

Elliott introduced this idea ahead of ANZ's discussions with the government about specific measures to enhance profitability in the region. These talks come as ANZ is negotiating with the Australian government to find ways to make its Pacific Island operations more viable amid growing concerns about increasing Chinese influence due to the withdrawal of Western financial services.

ANZ, the leading Pacific lender with operations in nine countries including Fiji and the Cook Islands, intends to maintain its presence in the region. However, Elliott noted that escalating risk management costs have rendered these businesses unable to cover the cost of capital. "If we were there purely commercially we would have just shut it down," he stated at the Pacific Banking Forum in Brisbane. "We have a higher obligation but...I have an obligation to my shareholders, it's their money at risk. That's the conversation we are having. What can the government do to help us be more sustainable?"

Australia has committed to increasing investment in Pacific Island countries to support their banking systems. Between 2011 and 2022, the region lost approximately 80% of its correspondent banking relationships in services denominated in U.S. dollars. This move is part of broader efforts by Australia and the United States to strengthen Western financial services in the Pacific amid fears that the withdrawal of such services could create a vacuum for China to fill.

Westpac, another Australian bank with Pacific operations, canceled a planned sale of its Pacific unit last year. Additionally, Bendigo Bank announced in 2023 that it was exiting Nauru, where it was the only bank, although it has since delayed its departure according to the Australian Broadcasting Corp. Neither Westpac nor Bendigo Bank immediately responded to requests for comment regarding their discussions with the Australian government.

Australian Treasurer Jim Chalmers addressed the significance of banking services in the Pacific in his speech at the event. He stated, "We have been actively talking to all the major Australian banks, to let them know how important a continued Australian banking presence in the region is to the government."

Elliott remarked that ANZ's discussions with the government had not yet addressed specific measures to enhance profitability. However, he suggested that it might be feasible for banks in the region to standardise some services to reduce costs without relaxing risk protocols. "Could we share, to lower the cost, the way we run things like AML and KYC?" he reiterated. "Those sorts of things can be done, but they have to be done over more than one market to be of benefit," he added.

By fLEXI tEAM