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Privacy and process why it is crucial to your business

Jon-Paul Hale describes a problem he has with one bank and offers some learnings from the experience.

Saturday, November 28th 2020, 5:55PM

It's been nice of ANZ to provide me with another example of privacy and process issues.

They don't seem to be learning from their mistakes and directives from the regulators.

I'm going to be interested in where this lands, as it's a doozy from both a client perspective and an operational perspective. As we enter into the new financial services regime for RFAs these are the issues we need to be considering.

While this is a lending and banking issue, it has relevance to all financial advisers.

What's the issue? Aside from process and privacy, in a word tax.

More specifically, tax residency.

A client of mine going through a new home build and accessing lending with ANZ has found themselves on the vicious end of ANZ dealing with AML and tax issues they would rather hide under the carpet and make go away than addressing their internal management issues.

How's this? My client was born in the USA.

Yes, I'm drawing a long bow on ANZ's conduct from ANZ's behaviour.

They have refused to acknowledge my request for information, and have been bloody unreasonable to the client.

Let me back up and explain this a bit for you:

The situation is; we have someone who while being born in the United States, was only there for six weeks before moving to the UK, where they grew up, and worked, until 2003. (I moved to Europe then back to US, for 2 years incl 1976 so 6&7 or 7&8, before UK where I did my growing up… I did live there. Not concerned about this, it was childhood and not as a tax payer. Left out for brevity and privacy protection.)

For all intents and purposes, this person has paid tax in the UK and never had US obligations.

In 2003 my client moved to New Zealand and in 2009 became a citizen, thinking that the lapsing passport and no contact with the US was enough to forget about it. (Updated)

In 2010 President Obama announced tax responsibilities for anyone who was a citizen, held a green card, or worked in the US and paid tax. This came into effect sometime between 2014 and 2017. My awareness is 2017, though checking further on the IRD website they have it from 2014, and it also includes insurance companies in the list of captured entities.

Now, my client, at this point had no idea of the tax issue that had just been created for them. I was only vaguely aware of it after discussing it with someone else earlier this year, as they were exploring moving to the US.

It's reasonable that the change announced in 2010 was entirely under the radar as my client was a Kiwi at this point. Thinking there's no responsibilities anywhere as they were a Kiwi at home. And home it has been for 17 years. Seventeen years this year, where the engagement with our culture has been better than many Kiwis, with extensive knowledge of Maori culture and language, with the honour of being whāngai by/to three Maori whanau.

So when my client approached a Kiwi bank to settle a Kiwi mortgage with a Kiwi client for a Kiwi house on a piece of Kiwi dirt, there was no idea of the international tax issues about to be unleashed. It's like a plot out of James Bond, without the guns and action. More like inaction on ANZ's part.

One of the forms asked to be completed is the tax residency status form.

It asks:


Tick one option that applies to you:

  • I am a tax resident in New Zealand only. Go to section 3.
  • I am a tax resident of one or more countries other than New Zealand. Complete the table below.

Given the view and understanding above, the answer was no.

ANZ didn't ask the country of birth, and nor do the application forms for the mortgage. The ID provided was a Kiwi Drivers licence, with no place of birth either.

So the loan was settled, and drawdown started for the build.

Somewhere between then and now ANZ figures out my client was born in the US. How? We think a visit to branch requested ID and their passport was used rather than a drivers licence.

Now, some will be thinking this person is hiding something?

No, I've known this client for many years, disclosure of place of birth and other information has been freely given to me for underwriting and needs analysis. Added to this, the horror of possibly getting this wrong has been taken far too personal for it to be some big show.

This translated into my client feeling like an outsider at home, the one place they have been able to finally call home and belong. The comment no longer a puzzle with the piece missing about living in New Zealand has been a common comment.

The raw emotion on this has been in line with this person's past behaviour as well, and it has been far more than any contrived story. I've been lied to by the best; this isn't one of them.

So we have a possible tax issue. Neat. Except ANZ starts with threats and aggressive actions towards my client. They are primarily freezing their account. A number of tears and pleading resulting in unfreezing it for a week, to pay the builder, but otherwise stopping the construction at a critical time.

Pretty harsh response to something that may be problematic for tax overseas; at the same time, the bank's due diligence on the lending should have a complete picture demonstrating no such issues.

For context, the tax issues start at incomes above $350,000. This client is nowhere near this. This is an admin issue that has no bearing on the bank's risk. 

There is a process of renouncing citizenship to be done, which isn't a problem; it just takes time.

So where's the issue?
There are two:

  1. Blind process without consideration of the client and their situation.
  2. Privacy and the response to complaints

The first bit is the client has taken a position on a contract based on the position ANZ took.

ANZ confirmed the lending; the client started building their house.

ANZ has a problem under commercial law, as they should have done their due diligence before offering the loan. The issue of them not doing their due diligence and identifying this issue prior is their problem, not my clients.

The second aspect is the entrapment of process. If the questions asked are not intuitive for the general public, then you're going to have people say no when they should say yes.

It's a bit like the Sovereign HIV question of old; Are you at a higher risk of contracting HIV? Than what? Your peer group?

If you are a gay man and your peer group are gay men, then no. You don't have a higher risk than the people around you. But you potentially do when compared to heterosexual men, at the same time, that's isn't the question that was asked.

Dumb question, stupid answers.

The Fair Trading Act update that came in a few years ago says that misleading or unclear contract terms are not allowed.

ANZ, and other banks too, asking these questions the way they are, are going to have hundreds if not thousands of client's with international tax problems.

This isn't client's being dishonest or fraudulent; it is a flawed process leading to poor outcomes.

The bank has the responsibility to manage this issue, alongside other AML requirements, not the client.

The second is more about how this has been handled.

I was asked to review what was going on to help.

So I did what most of us do, get an information authority signed and submit it.

Which I did over five weeks ago with no response.

Two weeks in ANZ called the client and said they were not sending anything to me as it was a legal matter and what was submitted wasn't a power of authority enabling me to act on the account.

No, I want the client's file, I don't wish to have authority to make changes, I just want the information. Without the file, I have no idea what I'm looking at.
I went back to them directly again clarifying the request, suggesting that we talk to the FMA and Privacy Commissioner. Again no response.

At four weeks, I followed up with a copy to the Privacy Commissioner and the FMA. That seemed to have had a response through a third-party channel commenting to me but nothing directly to me.

At four and a half weeks, as ANZ had only given my client three days to respond, I followed up with a submission to the Banking Ombudsman. Given that four weeks had no response and raising a complaint with ANZ seems to be impossible, that's the best path.

On the same day, I get an email from ANZ acknowledging my information request, ignoring what was requested and requested an updated tax residency statement.

No. That's not what I requested, and no, I'm not getting that completed.

So far:

  1. The Banking Ombudsman replied to the issue in about six hours.
  2. The Privacy Commissioner replied in about 24 hours.
  3. And the FMA replied within 48 hours.
  4. ANZ took four and a half weeks to acknowledge the request and ignore its content.

The Privacy Act states an information request need to be responded to within 20 days.

The handling of a complaint must be handled in a reasonable time frame and in a reasonable way.

ANZ has done neither. And to be clear, when I called before the information authority submission five weeks ago, I not only requested the address for the information authority to be sent to, I also put them on notice that there was a complaint pending.

The ANZ staff member confirmed to me that they were talking to the person relating to the situation; they were aware of my request coming and the reasons for the request.

So on the complaint piece ANZ have been on notice from me for about five weeks.

As to the client, I have not seen anything in the material from them outlining any complaint process. They haven't acknowledged that the client has a complaint either. This has been stated on more than one occasion with the emails to ANZ I have seen.

What's the learning from this?

  • Outside not dealing with ANZ, get your processes right.
  • I've had nothing but issues with ANZ on how they do business, read my other articles for details.
  • We have new rules coming for managing privacy, both the new Privacy Act and the new Code of Conduct.
  • We have a clear responsibility where it comes to managing information requests — both in how we manage them and how we respond to them.
  • We have documentation requirements with the new licensing requirements.
  • We also have clear complaint management requirements for identifying and managing complaints.
  • All of these areas, ANZ has failed multiple times; they are just not learning from their mistakes.


For clarity and disclosure of possible conflicts:

Personally, I don't bank with ANZ and never have. There is no personal issue here.
However, unless you include the old Post Bank they took over. I have had an account I was a signatory for with National Bank years ago, but neither was what I call a problem.

This is solely about ANZ and how they are treating their clients.

Tags: Opinion

« Does liability for advice stop when clients are sold?'Bullying' banking conduct »

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