Commonwealth Bank to pay $700M to settle AUSTRAC case
Financial Rights Legal Centre June 4, 2018 10:54 am By Cat Fredenburgh | Melbourne

Commonwealth Bank of Australia will pay $700 million to settle claims of lax anti-money laundering oversight.

As part of the deal, announced Monday, CBA will pay $700 million plus $2.5 million in legal fees and make further admissions to violating Australia’s Anti-Money Laundering and Counter-Terrorism Act, including violations in risk procedures, reporting, monitoring and customer due-diligence.

“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,” CBA Chief Executive Officer Matt Comyn said.

“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.”

AUSTRAC brought the case in August, accusing Australia’s largest bank of violating the anti-money laundering law on more than 50,000 occasions. In its initial defence, the bank admitted breaking the law 53,506 times but said it would defend many of the allegations.

In announcing the settlement, the bank said it had made significant changes to improve its risk management oversight, including shaking up its senior leadership overseeing financial crimes, and said it would continue to invest in its oversight controls.

As part of the settlement, CBA admitted to late filing of 53,506 threshold transaction reports for cash deposits through intelligent deposit machines,  inadequate adherence to risk assessment requirements for intelligent deposit machines on 14 occasions, and to late filing 149 suspicious matter reports.

It also admitted that between between October 2012 and October 2015, its transaction monitoring did not operate as intended on many accounts  and that it breached its due diligence obligations towards 80 customers.

CBA filed an amended defence in February to AUSTRAC’s amended statement of claim, which added 100 claims alleging it failed to report suspicious transactions. The bank at the time said it denied 89 of the the new allegations and admitted 11 in part.

At the time, CBA said that during the period covered by AUSTRAC’s claim to the end of 2017, it had submitted more than 19 million reports to the agency. Of those, 40,000 were “suspicious matter reports”, it said. The bank also responded to more than 20,000 requests for help from law enforcement agencies in 2017.

The bank has admitted that it was late in filing 53,506 [threshold transaction reports] to AUSTRAC, but said it would argue to the court that these breaches should be treated as “a single course of conduct”.

It blamed a software coding error in its intelligent deposit machines for the late filing.

The bank is still facing a Maurice Blackburn-led shareholder class action, filed on the heels of the AUSTRAC lawsuit.

The class action alleges that between July 1, 2015 and August 3, 2017, CBA failed to disclose to the market material information in relation to its anti-money laundering and counter terrorism financing controls, including that it was potentially exposed to an enforcement action by AUSTRAC.

“We categorically deny all allegations of liability,” CBA said of the class action. “We consider that we have complied with our continuous disclosure obligations at all times. There was no price sensitive information about the matters raised in the AUSTRAC proceeding that required disclosure.”

CBA is represented by Herbert Smith Freehills. The class is represented by Maurice Blackburn.

The AUSTRAC case is Australian Transaction Reports & Analysis v Commonwealth Bank of Australia.

The class action is Zonia Holdings Pty Ltd v Commonwealth Bank of Australia.

The following two tabs change content below.

Cat Fredenburgh

Cat Fredenburgh has been covering legal news for 12 years. She was previously Editor-in-Chief at US legal news publication Law360. She is the Co-Founder of Lawyerly.