Last week, it was revealed that the Australian Transaction Reports and Analysis Centre (AUSTRAC) had initiated civil penalty proceedings in the Federal Court against the Commonwealth Bank of Australia (CBA) for “serious and systemic non-compliance” with anti-money laundering and counter-terrorism laws.
In a statement released on 3 August, AUSTRAC said that CBA had breached the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act), particularly regarding its use of intelligent deposit machines (IDMs).
AUSTRAC’s action, which was detailed in a 580-page statement of claim, alleges over 53,700 contraventions of the AML/CTF Act.
The damning claim alleges that:
- nearly $9 billion of cash was deposited through the bank’s IDMs before it conducted an assessment of the money laundering/terrorism funding risks associated with the machinery (nearly three years after they were first introduced);
- the bank failed to give 53,506 “threshold transaction” reports (TTRs) to AUSTRAC on time for cash transactions of $10,000 or more through IDMs (totalling $624.7 million) from November 2012 to September 2015;
- the bank failed to report suspicious matters either on time or at all involving transactions totalling over $77 million; and that
- even after CBA became aware of suspected money laundering or structuring on CBA accounts, it did not monitor its customers to mitigate and manage ML/TF risk, including the ongoing ML/TF risks of doing business with those customers.
The claim goes on to allege that even when the federal police had advised the bank that several accounts were connected with ongoing investigations (including those regarding drug importation and unlawful processing of money), the bank “permitted several of the accounts to remain open even after this time and further transactions occurred”.
The Australian Government Solicitor Sonja Marsic concluded that “as a result of the failure” to file TTRS and suspicious matter reports “on time or at all” . . . resulted in “lost intelligence and evidence (including CCTV footage), further money laundering and lost proceeds of crime”.
Ms Marsic added: “The effect of CommBank’s conduct in this matter has exposed the Australian community to serious and ongoing financial crime.”
‘Mistakes can be made’
In a statement released on Monday, 7 August, the bank said that it had “carefully reviewed” the 580 pages of the statement filed by AUSTRAC and takes the allegations made “very seriously”.
Noting that a defence will “take a significant time to prepare”, the bank emphasised that what it can say on the matter is “limited” while the proceedings “run their course”.
However, it stated that the bank “remains committed to continuously improve its compliance with the AML/CTF Act and will continue to keep AUSTRAC abreast of those efforts”.
The bank said: “We respect greatly the role AUSTRAC plays in keeping Australians safe. To that end, we work closely with AUSTRAC as well as the Australian Federal Police and other authorities.
“While legal proceedings limit the detail we are able to provide, we acknowledge the public interest in this matter, and are committed to being as open as we can with updates to all our stakeholders.”
Noting the “extensive public discussion” of the matter, and highlighting the case’s “complexity”, CBA was keen to highlight that its IDMs have been “providing the correct Threshold Transaction Reports (TTRs) to AUSTRAC, and have been since September 2015”.
It added that while the machines were providing “all the correct TTR reporting” when first rolled out, an “unrelated software update” in “late 2012” (and the corresponding “coding error”) was reportedly to blame for not creating the TTRs needed.
The bank stated that the error only became apparent nearly three years later, and “within a month” of being discovered, AUSTRAC was notified, the TTRs were delivered and the issue was fixed.
CBA continued: “The vast majority of the reporting failures alleged in the statement of claim (approximately 53,000) relate specifically to this coding error. We recognise that there are other serious allegations in the claim unrelated to the TTRs.
“In an organisation as large as Commonwealth Bank, mistakes can be made. We know that because we are a big organisation, these mistakes can have significant impact.
“We need to be ever more vigilant in the area of financial crime and anti-money laundering. The rapid evolution of technology in banking, the increased sophistication of criminal activity, and higher regulatory expectations together create an imperative to continuously raise our standards.”
The banks said that it had increased, and was continuing to work on, its investment in “people, technology and processes through a program designed not only to address existing weaknesses, but also to meet the growing complexity in this area”.
“We continue to have an ongoing cooperative relationship with AUSTRAC and have kept them abreast of proactive steps we have taken to further enhance our compliance program and operations,” the bank concluded.
[Related: CBA shares tank on money laundering claims]
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.