The Commonwealth Bank of Australia and the anti-money-laundering watchdog, the Australian Transaction Reports and Analysis Centre (AUSTRAC), have resolved civil proceedings launched in August last year.
AUSTRAC took action against the bank for what it said were serious shortcomings in CBA’s anti-money-laundering compliance regime. The organisation said that CBA had committed tens of thousands of infractions of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act), most of which related to the bank’s Intelligent Deposit Machines (IDMs): ATMs rolled out in May 2012 that allowed cash deposits.
CBA revealed today that it would pay a civil penalty of $700 million as well as $2.5 million in legal costs incurred by AUSTRAC.
The bank in December admitted a number of failures relating to money laundering compliance issues, including the late lodgement of more than 53,000 threshold transaction reports (TTRs) with AUSTRAC. The TTRs related to the use of the IDMs for large cash deposits.
The bank previously blamed a coding error for the problem with the TTRs. However, the bank also said it would defend a number of claims by AUSTRAC relating to suspicious matter reports and CBA’s ongoing customer due diligence program.
CBA today acknowledged additional contraventions of the AML/CTF Act, including contraventions in risk procedures, reporting, monitoring and customer due-diligence.
In February, the bank said it had earmarked $375 million to pay penalties arising from the AUSTRAC action. Today it said it would recognise a $700 million provision in its results for the 12 months ending 30 June; the bank announces its full year results in August.
The Federal Court will still be required to approve the settlement.
“As we have seen in this case, criminals will exploit poor business practices to launder the proceeds of their crimes,” AUSTRAC CEO Nicole 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.”
“While not deliberate, we fully appreciate the seriousness of the mistakes we made,” CBA CEO Matt Comyn said in a statement. “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,” the CEO said.
“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. To date we have spent over $400 million on systems, processes and people relating to AML/CTF compliance and will continue to prioritise investment in this area.”
CBA said it had upgraded a financial crime technology platform used to monitor accounts and transactions for suspicious activity. The bank said it was also using enhanced digital electronic customer verification processes to supplement face-to-face identification to reduce the risk of document fraud.
Comyn became CEO in April, following an announcement in January that he would replace Ian Narev. His promotion has seen significant change in the bank’s executive ranks, including the exit of chief information officer David Whiteing.
Comyn said today that the bank had also “changed senior leadership in the key roles overseeing financial crimes compliance supported by significant resources and clear accountabilities.”