CBA expects $375m hit from AUSTRAC court stoush

Estimates cost of case linked to breaches of anti-money-laundering rules

The Commonwealth Bank has earmarked $375 million to pay for penalties arising from legal action launched against it by AUSTRAC, Australia’s anti-money-laundering watchdog.

The bank’s half-year results, announced today, noted that it has “provided for a civil penalty in the amount of $375 million” which it believes “to be a reliable estimate of the level of penalty that a Court may impose”.

“This takes into account currently available information, including legal advice received by the Group in relation to AUSTRAC’s claims,” the bank said.

AUSTRAC last year filed Federal Court proceedings against the bank, which AUSTRAC said had failed to uphold its anti-money-laundering obligations.

The bank has been accused of more than 53,800 contraventions of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.

CBA in December filed its defence, acknowledging some breaches of its obligations.

Many of AUSTRAC’s claims relate to the bank’s Intelligent Deposit Machines (IDMs), which allow cash deposits.

The bank has claimed that a coding error was responsible for a failure to report suspicious transactions involving the IDMs.

“CBA’s automated process identified cash deposits by searching for certain transaction codes and then reported cash transactions of $10,000 or more,” states one of the documents that CBA has lodged with the Federal Court.

“In November 2012, in order to correct an error message that was appearing on customer statements, a new transaction code was applied in respect of some cash deposits through IDMs. However, the automated TTR reporting process was not updated to search for that new transaction code.”

Today CBA said it had also taken a $200 million expense provision for expected costs relating to currently known regulatory, compliance and remediation program costs, including the royal commission into financial services.

Last month the bank revealed that Matt Comyn will replace Ian Narev as group CEO, effective 9 April. Comyn currently heads up retail banking services at CBA.

The bank today announced a cash net profit after tax of $4.74 billion for the six months ending 31 December, down 1.9 per cent on the prior comparable period.

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