Kiwibank has taken steps to comply with the legislation, chief executive Paul Brock said.

State-owned Kiwibank has been given a public telling off by the Reserve Bank over its failure to adhere to legislation which aims to counter terrorism financing.

In a statement Wellington-headquartered Kiwibank said the RBNZ, New Zealand's central bank "found that during the period June 2013 to June 2014, Kiwibank did not always have fully compliant procedures" in relation to the Anti-Money Laundering/Countering Financing of Terrorism Act which came into effect in 2013.

Kiwibank has acknowledged the problems and said it had taken steps to comply with the legislation.

The Reserve Bank issued an enforcement action notice. It has not punished Kiwibank beyond the public censure.

"As the supervisor of banks for compliance with their Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) obligations, the [Reserve Bank of New Zealand] has reasonable grounds to believe that for various periods of time between 30 June 2013 and June 2014, Kiwibank did not fully meet all the requirements in respect to the following customer due diligence (CDD) obligations under the Act," the RBNZ said in a statement.

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Kiwibank's failures included not meeting a requirement for existing customers to "top up" their identification details to the required standard, performing required checks for "high risk persons, verifying the source of funds for 'certain high risk customers' and failing to collect address information for customers who might conduct "occasional transactions in a Kiwibank branch".

It is not the first time the Reserve Bank has issued an enforcement action notice under the legislation, with JP Morgan Chase Bank's New Zealand office also censured in March, however Wednesday's statement on Kiwibank issues suggested Kiwibank's failings were significantly broader than the US bank's.

Set up by the former Labour Government, Kiwibank is operated mostly through the retail network of New Zealand Post, its parent company. New Zealand Post is 100 per cent owned by the taxpayer.

Kiwibank said in a statement that it was committed to meeting the requirements of the legislation.

"Kiwibank accepts that it did not meet some of the requirements during the period and has taken steps to remedy the issues identified.

A spokesman for Kiwibank conceded the statement from the Reserve Bank was embarrassing.

"Yes, it's disappointing. We had a comprehensive programme in place when the legislation came into effect, but during that first year we failed to tick all the boxes and we have to accept that."

The bank had around 900,000 customers and in some cases found it difficult to contact all of them where additional information was required after the legislation came into force, the spokesman said.

The spokesmans maintained the bank's staff, many of whom deal mostly with postal transactions, were properly trained to deal with the requirements of the legislation.

"They're technical issues but obviously our preference would have been to meet the benchmark. We didn't."

The Reserve Bank had first indicated that Kiwibank was not meeting the standards shortly after the legislation came into force. Kiwibank referred questions as to why it took around two years to make Wednesday's statement back to the Reserve Bank.