In what they are saying would be a “true heavyweight legal battle”, the two companies aim to take the bank to court following the news that Australia’s financial intelligence and regulatory agency, AUSTRAC, had initiated legal proceedings against the CBA alleging "serious and systemic non-compliance" with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act).
After news of the AUSTRAC legal proceedings became public, CBA shares dropped from an intra-day high of $84.69 on 3 August 2017 to an opening price of $80.11 on 7 August 2017.
IMF Bentham said that this was "a significant movement for an otherwise stable stock".
The proposed action against the CBA will allege contraventions involving “engaging in misleading or deceptive conduct and/or breaching continuous disclosure obligations in relation to its non-compliance with the AML/CTF Act”, which IMF Bentham said is “information that a reasonable person would expect to have a material effect on the price or value of CBA shares”.
As such, shareholders who purchased ordinary CBA shares between 17 August 2015 and 3 August 2017 (and still held some or all of those shares on until after 1pm on 3 August 2017) are being asked to register their claims on the IMF website, while work is finalised by the solicitors and counsel on the Federal Court pleading to commence the class action.
The potential class action will be run on a no win – no fee basis, with all costs fully underwritten by IMF and Maurice Blackburn.
IMF has said that it will pay the other side's costs if the class action is unsuccessful and the claims are lost.
Failure to make proper market disclosure ‘adds insult to injury’
“AUSTRAC alleges that CBA contravened the AML/CTF Act on more than 53,000 occasions. The AUSTRAC allegations are extensive and it is astounding that the market would not be advised of such serious and repeated breaches as soon as the company became aware of them,” national head of class actions at Maurice Blackburn Andrew Watson said.
“Instead the CBA has said that its board was aware of the breaches in the second half of 2015 but chose to say nothing to the ASX until 4 August 2017.
“As the largest company on the ASX, shareholders would expect the CBA to take a leadership role in setting high standards of corporate conduct. The AUSTRAC allegations, if proven, show an abject failure of corporate governance and risk management. The failure to make proper disclosure to the market regarding those failures adds insult to injury for shareholders.
“Our investigations and analysis show that this drop was in the top 1 per cent of price movements that CBA experienced in the past five years, making it apparent that the news was of material significance to shareholders,” Mr Watson said.
Hugh McLernon, director of IMF Bentham, added: “CBA is facing most serious allegations from AUSTRAC, and there are serious questions to be answered about what the company knew and when.”
[Related: CBA could face $966bn in penalties]
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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.