NZ Mint says there is a diminishing market for secure boxes, and stringent anti-money laundering requirements are an added compliance cost.
Once, every movie spy hid their passports and wads of cash in a safety deposit box. But soon, rogue operative Jason Bourne will need a new stash.
Respected legal tender coin producer and bullion trader New Zealand Mint is shutting down its safety deposit boxes, after many years. Most of the banks have already exited, leaving just Westpac, and specialist providers like Commonwealth Vault and NZ Vault.
NZ Mint chief executive Simon Harding said there had been a diminishing market, and so this year it was phasing out the last boxes.
It comes after NZ Mint's biggest competitor, Commonwealth Vault, was handed a formal warning for repeated non-compliance with the anti-money laundering and terrorism financing law.
Its parent company Customhouse Safe Deposits Limited was warned by the Department of Internal Affairs, for failing to meet anti-money laundering laws including conducting customer due diligence, and adequately monitoring accounts and transactions.
It was not alleged the company was involved in money laundering or the financing of terrorism and the company said in 2019 it was taking steps to improve its performance.
One safety deposit box customer said there was increasing scrutiny of the contents of boxes. She said a box holder who had visited just before her had $8 million cash in his box, she had learned.
Simon Harding said safety deposit boxes were not core business for his company, which mints legal tender coins, trades in gold and silver, and offers a bullion depository for clients in New Zealand and around the world.
There had been a diminishing market for the boxes, Harding said. Once, families kept the deeds to their homes in safety deposit boxes, he said, but now that had all moved online – and so this year, NZ Mint was phasing out the last ones. The increased compliance costs of anti-money laundering regulations since 2013 had contributed to that decision.
An Internal Affairs spokesperson said the department had supervised safety deposit boxes since 2013, under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009.
An official risk assessment determines safety deposit boxes to be low risk. To maintain that low risk, it suggests – but does not mandate – that providers prohibit their customers from storing cash.
It profiles higher risk customers as more likely to be from out of town, or multiple co-renters listed on one box rental contract, or frequent changes to those authorised to access. They may visit a safe deposit box on an unusually frequent basis, or carry bags that could hide large amounts of cash.
The Internal Affairs risk assessment says the guidance reflects ways that money launderers have acted in the past. "Transactions or activities listed in the table may not necessarily signal money laundering if they are consistent with a customer’s legitimate business," it adds.
NZ Mint is helping its customers transfer the contents of their boxes to NZ Vault, which maintains safety deposit boxes at three sites in Auckland and Wellington.
NZ Vault has already mopped up the safety deposit box businesses of ANZ, BNZ and National Banks, as well as purchasing the secure Guardian Trust and NZI Insurance's secure storage businesses.
NZ Vault chief executive John Mulvey says it physically moved entire stacks of safety deposit boxes from National Bank and NZ Guardian Trust through the centre of Wellington in carefully-planned late night operations, with armed police providing security. But the New Zealand Mint customers are gradually moving over the contents of their boxes, themselves.
In downtown Auckland, the Guardian Vault on Queen St has a 10 tonne steel door, steel-enforced walls, bullet-proof glass and seismic sensors.
Mulvey said his company had worked with the Department of Internal Affairs to develop the Anti-Money Laundering policies, and he had been surprised to see the "slip-up" by Commonwealth Vault in 2019.
"We haven't had an issue with the AML, we're a very conservative organisation and we will always go that extra step to actively work with the regulators to meet the requirements."
"It's a very broad range of customers," Mulvey said. "A lot of people just store things like family photos and their passport. It's often items of sentimental value, not necessarily monetary value.
"In the global financial crisis in 2008, a lot of people thought the banking system was at risk and so they were taking money out of the bank and putting it into their safety deposit boxes." – John Mulvey, NZ Vault
"I've got a safety deposit box myself, and there's very little in there that's of any value at all. It's mainly family documents and photos and memorial cards – things that go back through the years in our family."
The cost of a box ranged from about $190 a year for a small one, to nearly $700 for a bigger one.
Mulvey acknowledged safety deposit boxes were "not a dynamic industry". On average, people held boxes for 16 years. "We've got boxes that date back to the 1940s that get passed down to children and never get closed. Some people will open and close boxes in six months, but the vast majority hold them long-term – so that's one of the barriers to entry to the business."
Many Indian New Zealanders kept their ceremonial gold jewellery in deposit boxes, he said; members of the Chinese community were more likely to keep small amounts of cash. "They don't like having it around the house, there was a period when there were a lot of home invasions in their community, and some of the Chinese community don't trust banks with their cash.
"In the global financial crisis in 2008, a lot of people thought the banking system was at risk and so they were taking money out of the bank and putting it into their safety deposit boxes. That would have all subsequently filtered back out again as confidence grew back in the banking system."
Perhaps ironically, given that cryptocurrencies are meant to end a reliance on physical money and institutions, some people stored an electronic drive containing their Bitcoin chain. "If they lose that code they can't get it replaced, and I know of people who got into Bitcoin very early in the piece and by the time it took off, they couldn't find their Bitcoins."
Not that Mulvey knew the contents of individual clients' boxes. Clients do not have to disclose what they store in their boxes; they only sign an assurance that there are no illegal items like drugs, or potentially dangerous items like firearms, explosives and chemicals.
The client is the only person who can open their vault, having passed through the video surveillance, photo and signature identification and the steel door. They lead the custodian to their box, and both their key and the custodian's master key must turn at the same time for it to open.
So, does Jason Bourne keep a stash of cash and passports at NZ Vault? Mulvey laughed: "I couldn't confirm or deny that."
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