CBA to pay $700m penalty in AUSTRAC case

The Commonwealth Bank of Australia (CBA) announced that it has entered into an agreement with AUSTRAC, the Australian government’s financial intelligence agency, to resolve the civil proceedings commenced by the agency in the Federal Court of Australia on 3 August 2017.

The agreement follows court-ordered mediation between CBA and AUSTRAC and remains subject to court approval.

As part of the agreement, CBA will pay a civil penalty of $700 million together with AUSTRAC’s legal costs of $2.5 million.

CBA has admitted further contraventions of Australia’s Anti-Money Laundering and Counter-Terrorism (AML/CTF) Act, beyond those already admitted, including contraventions in risk procedures, reporting, monitoring and customer due diligence.

AUSTRAC’s civil proceedings are otherwise dismissed.

“This agreement, while it still needs to be approved by the Federal Court, brings certainty to one of the most significant issues we have faced,” CBA chief executive officer Matt Comyn said.

“While not deliberate, we fully appreciate the seriousness of the mistakes we made. Our agreement today is a clear acknowledgement of our failures and is an important step towards moving the bank forward. On behalf of Commonwealth Bank, I apologise to the community for letting them down.

“Banks have a critical role to play in combating financial crime and protecting the integrity of the financial system. In reaching this position, we have also agreed with AUSTRAC that we will work closely together based on an open and constructive approach.

“We are committed to build on the significant changes made in recent years as part of a comprehensive program to improve operational risk management and compliance at the bank.”

Mr Comyn said that to date the bank has spent over $400 million on systems, processes and people relating to AML/CTF compliance and will continue to prioritise investment in this area.

“We have changed senior leadership in the key roles overseeing financial crimes compliance supported by significant resources and clear accountabilities,” the CEO said.

“We have started implementing our response to the recommendations provided to us by our prudential regulator, APRA, to ensure our governance, culture and accountability frameworks and practices meet the high standards expected of us.

“I am also very focused on ensuring we have clear lines of accountability across our entire business. This includes an approach to risk management that recognises the importance of non-financial risks, including an escalation framework that ensures key operational and compliance issues such as these are identified, escalated and resolved in a timely manner.”

AUSTRAC’s CEO, Nicole Rose PSM, said that this outcome sends a strong message to the industry that serious non-compliance with the AML/CTF Act will not be tolerated.

“As we have seen in this case, criminals will exploit poor business practices to launder the proceeds of their crimes,” Ms Rose said.

“This has real impacts on the everyday lives of Australians and puts the community at risk by increasing opportunities for terrorists to support attacks here and overseas, and enabling organised crime groups to peddle drugs to our families and friends.

“We know that businesses are the first line of defence in protecting the community and our financial system from criminal abuse, and it is critical for AML/CTF compliance and risk management to be embedded in business strategy and practices.

“I hope this result alerts the financial sector to the consequences of poor compliance and reinforces that businesses need to take their obligations seriously.”

Ms Rose added that AUSTRAC’s focus is to work collaboratively with and support the industry to deter criminal activity and welcomed CBA’s decision to commence work on a Program of Action to address their AML/CTF compliance failings.

“We will continue to work collaboratively with CBA as it progresses this work and I am encouraged by the manner in which CBA has handled these negotiations.

“We want compliance to be voluntary, and even taken on with enthusiasm; however, we will not shy away from using our enforcement powers where necessary. In the end, our role is about protecting the community and we take this role seriously.”