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CBA fine could exceed $500m, says analyst

Morningstar has speculated that Australia’s largest bank could be made to pay more than half a billion dollars in fines for failing to comply with anti-money laundering and counter terrorism financing laws.

In a research note released last week, Morningstar analyst David Ellis noted that the recent news of additional AUSTRAC claims, coupled with potential negativity from the forthcoming Royal Commission, increased uncertainty around CBA for the next 12 to 18 months.

Morningstar maintains its forecast for CBA to deliver a $10.3 billion cash profit in FY18.

“We have not included potential fines in our forecast that may result from the AUSTRAC federal court proceedings. Interim fiscal 2018 results are due 7 February 2018, and we expect a cash profit around $5.1 billion for the six months ended 31 December 2017,” Mr Ellis said.

The analyst said that the federal court will determine the financial consequences of the bank’s recent “mis-steps”, and that while the quantum of any fine is uncertain, Morningstar believes that it could be “at least $500 million”.

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However, there are also suggestions that the fines could surpass $1 trillion, if charged the maximum penalty for all the alleged breaches.

The government’s financial intelligence and regulatory body, AUSTRAC, now alleges that CBA has contravened the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF) on more than 53,800 occasions.

It added: “The maximum penalty for an individual contravention alleged in the amended statement of claim is up to $21 million.”

As such, if CBA is found guilty and charged the maximum penalty for each of the 53,800 breaches, it could be fined more than $1.1 trillion.

“The Commonwealth Bank point the court may consider whether multiple contraventions arose out of the same course of conduct, and assess the appropriate penalty for that conduct, not necessarily based on the number of breaches or contraventions,” Mr Ellis said.

“The bank is implying any penalty imposed by the court should not be calculated on the 53,506 admitted breaches, but rather the one system-related error.

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“Whether the bank is successful or not in persuading the court of its line of argument will unfold during 2018.”

[Related: CBA accused of more AML/CTF breaches]

 

CBA fine could exceed $500m, says analyst
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