The Australian Transaction Reports and Analysis Centre (AUSTRAC) last year 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.
It is alleged that the bank breached AML/CTF on a plethora of occasions — with CBA having admitted 11 of the allegations already, including the late reporting of 53,506 threshold transaction reports.
It was estimated that, should the bank have been charged the maximum penalty for each of the breaches, it could have been fined more than $1 trillion.
However, the case has been referred to mediation and is expected to be handled out of court.
The Federal Court of Australia ordered in March that mediation was to begin “no later than 25 May 2018” (last Friday), and CBA has now confirmed that discussion has begun.
A CBA statement on the matter reads: “Commonwealth Bank of Australia (CBA) refers to its announcement on 22 March 2018, noting that the Federal Court ordered mediation to occur by 25 May 2018 in the civil penalty proceedings initiated by AUSTRAC on 3 August 2017.
“The parties have been engaged in mediation and discussions are continuing.”
A further case management hearing will be held on 7 December 2018.
CBA class action progresses
As the mediation continues, so too does the shareholder class action on the matter.
Last year, law firm Maurice Blackburn and litigation funder IMF Bentham filed a class action for CBA shareholders regarding the drop in the bank’s share prices following AUSTRAC allegations.
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.
The legal bodies have stated that this is “a significant movement for an otherwise stable stock”.
The proposed action against CBA alleges 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”.
Speaking to Mortgage Business, IMF Bentham’s investment manager, Matthew Kennedy, said that the class action, which involves more than 14,000 shareholders, is “progressing well” with pleadings almost closed and discovery getting underway.
Mr Kennedy said that it was not possible to estimate how long the process could take, adding: “It is really at the beginning of the discovery process and it’s quite an involved process. It’s hard to say how long it will take because we don’t possess all the documents, CBA do.
“So, all we can say is that discovery is now underway, the process has commenced and the pleadings are almost closed, which is an important stage to get to in a proceeding.”
He added that if any CBA shareholder acquired shares between 1 July 2015 and 3 August 2017 and thinks they have a loss, they can still join the IMF class action via IMF Bentham’s website.
CBA has previously rejected the allegations completely, issuing a statement in February outlining that it believed that it had “complied with [its] continuous disclosure obligations at all times”.
“There was no price-sensitive information about the matters raised in the AUSTRAC proceeding that required disclosure,” the statement read.
The major bank has had a difficult year so far, following allegations of misconduct by financial advisers, mis-selling of insurance, allegations that it rigged the Bank Bill Swap Rate, overcharging of interest rates and recent technological failures.
Further, an inquiry launched by the Australian Prudential Regulation Authority (APRA) into the governance, culture and accountability within the CBA Group (as a result of the multiple alleged failings) slammed the bank for having “inadequate oversight”, “unclear accountabilities” and “a widespread sense of complacency”, among many other failings.
The bank has acknowledged APRA’s concerns and apologised for them, offering an enforceable undertaking and confirming that it will implement all the recommendations contained in the report of the Prudential Inquiry.
Speaking following the release of the report last month, CBA chief executive officer Matt Comyn said: “Change starts with acknowledging mistakes.
“I apologise to the bank’s customers and staff, our regulators, our shareholders and the Australian community for letting them down.
“We will make the necessary changes to become a better bank and we will be transparent about our progress. This includes establishing a much higher level of accountability and consequence for our actions and the impact we have on customers. This starts with me.”
[Related: CBA’s ‘Project Magellan’ probed by RC]