Commonwealth Bank admits multiple breaches in money laundering case - Financial Times

13/12/2017

Commonwealth Bank admits multiple breaches in money laundering case

Australia’s biggest bank admits breaking the law but fights some allegations

Australian regulators have alleged that CBA’s deposit machines were used by drug dealers and other criminals to launder cash © Bloomberg

Jamie Smyth in Sydney

Commonwealth Bank of Australia has admitted multiple breaches of money laundering and counter terrorism laws in its response to a court action filed by Australia’s financial crime fighting agency.

But the country’s biggest bank by assets said on Wednesday it would test some of the claims made by the Australian Transaction Reports and Analysis Centre in a case that has plunged CBA into crisis and cost the job of Ian Narev, chief executive.

“We take our anti-money laundering and counter-terrorism financing obligations extremely seriously. We deeply regret any failure to comply with these obligations. CBA is accountable for those deficiencies,” said the bank.

Austrac has accused CBA of more than 50,000 breaches of the law by failing to adequately monitor A$624.7m of transactions on its network of intelligent deposit machines (IDMs) over three years.

The financial crime fighting agency alleges CBA’s IDMs were used by drug dealers and other criminals to launder tens of millions in cash. It alleges the bank failed to adequately assess the risk posed by the rollout of the IDMs, which were introduced in 2012 and facilitated anonymous cash and cheque deposits of up to A$20,000 per transaction. The machines count the cash and instantly credit the designated recipient.

The agency also alleged that CBA failed to adequately report unusual transactions totalling more than A$77m or to monitor suspicious customers after it became aware of possible money laundering.

CBA said Austrac had indicated it was preparing to file additional allegations of legal breaches — a move that would require the bank to amend its legal defence.

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Legal papers filed by CBA on Wednesday show the bank admits failing to file 53,506 transaction reports on time to the authorities, a “move that deprived law enforcement of some additional intelligence”. It blames a single systems-related error for the problem. The bank is calling for these multiple failures to be treated as a single contravention of the law. This could dramatically reduce any penalty imposed on the bank.

CBA also admits that it did not adequately adhere to risk assessment requirements for IDMs. But it says it does not accept Austrac’s claim that this failure amounts to eight separate contraventions of the law. It also denies 83 allegations concerning suspicious transaction reports and 19 allegations regarding customer due diligence.

CBA said Austrac has indicated to the bank that it planned to file additional allegations of legal breaches in relation to its money laundering investigation. CBA said it would amend its legal defence if this happens, and it would highlight to the court the efforts it has taken since 2015 to strengthen its compliance to financial crimes fighting rules.

The Austrac case, when first revealed in August, sent shockwaves through Australia’s banking sector, intensifying political pressure for a public inquiry into banks’ misconduct that was finally agreed last month.

The scandal led CBA to announce the retirement of Mr Narev, slash remuneration for bank executives and board members, and undertake reviews of its culture and procedures. CBA also faces a class-action lawsuit from shareholders.