The investigative report, authored by Jake Kenny of Stuff.co.nz, details the experiences of Penelope Barnhill of Penelope Barnhill Jewellery, based in Auckland, who found her business financially ‘frozen’ after incorrectly being targeted by anti-money laundering regulations.
Barnhill has contacted Jeweller and is asking members of the jewellery industry who have encountered similar issues to come forward.
A jeweller with more than 30 years of experience, Barnhill received an unexpected email from her bank while on holiday in Asia last September. The email flagged money-laundering concerns related to her business activities.
Up until that point, Barnhill had been a customer of KiwiBank for around 10 years, a New Zealand wholly state-owned bank and financial services provider. The email requested proof of identity because Barnhill’s accounts are associated with a jewellery business, which Kiwibank supposedly classifies as a "high-risk industry."
Given that the email was rather bluntly requesting highly sensitive information while she was abroad, Barnhill decided to ignore it. After returning to New Zealand in November, she received a second email warning that her accounts would be frozen and, if she did not provide the requested documentation, later closed.
Barnhill described the questions as invasive and explained that she is a sole trader who hand-makes her jewellery, provided background on her business, and supplied a copy of her passport.
Concerned that she may have fallen for a scam and passed along her information to bad actors, Barnhill contacted the bank directly and was informed that the emails were legitimate.
She provided all additional identification and anti-money laundering information as requested.
Despite complying with these requests, Kiwibank froze Barnhill’s accounts four days before the original deadline it had provided her. She only became aware that her business accounts were frozen when automatic payments began failing, and her available account balance dropped to zero.
“I was just so shocked. It stopped me working. I didn’t understand what was going on. I needed my accounts unfrozen to work," she said.
“I was shaking. I told the clerk I had pins and needles running up and down my arm. I felt like I was going to have a heart attack.”
Nothing but uncertainty and stress
After raising the issue in person at a bank branch, Barnhill received an email stating that the freeze on her accounts had been lifted for five days, but that more information was required or the accounts would be frozen again.
She was asked to provide her passport, proof of address, and proof of income, and was questioned about the purpose of her accounts, expected income streams, and whether she made cash and/or international transactions.
Despite once again complying, Barnhill still had not received confirmation by early December. After another phone call to Kiwibank, she received an email confirming that her information had been accepted and that account restrictions had been removed.
Barnhill said the disruption occurred during the critical Christmas trading period, when she earns 65-80 per cent of her annual income, and significantly affected her ability to work.
“I was treated as guilty from the start,” she said.
“I just don’t want this happening to anyone else. It has all been so inconclusive. I’ve done nothing wrong. They owe me a hell of a lot more than that, and even then I don’t know if I would accept it.
“I just felt so tainted and so dirty because of all of this. I had to go to the hospital for high blood pressure and stress-related anxiety.”
She also reports ongoing online banking issues, including repeated forced logouts. A customer also reports receiving unusual security warnings when attempting to pay her. Barnhill eventually closed her accounts and left Kiwibank.
Not good enough
Barnhill lodged a formal complaint, and Kiwibank apologised for the customer service failures. The bank initially offers $100 compensation, later increasing the offer to $250, and finally to $1,000.
Barnhill said she does not intend to accept the payment and maintains the experience caused serious emotional distress and hospital treatment for stress and high blood pressure.
Kiwibank stated that it was fulfilling its legal obligations under anti-money laundering legislation. The bank says customers may be reviewed based on business type and account activity and that such reviews do not imply wrongdoing. It acknowledges that aspects of Barnhill's experience, particularly communication and customer support, fell below its expected standard and apologises.
“We are sorry for the distress Ms Barnhill experienced," a statement reads.
“The communication and support Ms Barnhill received was not the standard we expect of ourselves, and not the experience customers should have when dealing with us. We understand why she was frustrated and upset, and we apologise for that.”
Asked by the media why Barnhill was identified as high risk in the first place, a spokesperson said customers may be reviewed based on a range of factors, including their business and account activity.
“These reviews are a standard part of meeting our legal obligations and are not, in themselves, an indication that a customer has done anything wrong,” the spokesperson said.
“We are sorry for the distress this caused Ms Barnhill. We understand why she feels the way she does. The experience she describes is not the one we want customers to have. While we were carrying out obligations required by law, there are aspects of this situation we should have handled differently, and we apologise for that.”
Taking it up the ladder
Barnhill took the issue to the Banking Ombudsman Scheme, which recently issued preliminary findings. It was said that KiwiBank incorrectly froze Barnhill's accounts four days before its own deadline and failed to notify her of this action. It also did not respond adequately to her repeated attempts to resolve the issue.
With that said, the Ombudsman also concluded that Kiwibank was entitled to conduct anti-money laundering customer due diligence and that the disruption was temporary. It was also said that there was no material financial hardship or lasting damage. The bank's offer of $1,000 compensation was also determined to be reasonable. Barnhill takes issue with these findings.
“I also felt my reputation was damaged," she said.
“I still don’t understand why they had a right to do it. I opened the account with full disclosure that I was an artist and jeweller. The bank’s wrongdoing has had a very serious effect on me.”
The preliminary decision is open for submissions until 15 July before becoming final.
Editor's Note: Any members of the jewellery industry who have experienced similar issues to those described in this report are encouraged to contact Jeweller.
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