The Commonwealth Bank has agreed to pay the biggest fine in Australian corporate history for breaches of anti-money laundering and counter-terrorism financing laws that resulted in millions of dollars flowing through to drug importers.
CBA will pay $700 million ($NZ760m) plus legal costs after federal financial intelligence agency AUSTRAC last year accused the bank of serious and systemic failures to report suspicious deposits, transfers and accounts.
As part of the settlement, CBA admitted to the late filing of 53,506 reports of transactions of $10,000 ($NZ10,8637) or more through its “intelligent deposit machines” (IDMs).
Banks are required to report these large transactions within 10 business days, so that AUSTRAC can monitor them to see if the money might be going to crime gangs or terrorist networks.
The Commonwealth Bank had originally considered challenging the number of breaches, arguing that a single coding error had led to the failure to report the 53,506 transactions.
However, it later decided to admit most of the alleged breaches and try to reach a settlement.
For a period of three years, the bank also failed to properly monitor transactions on 778,370 accounts to check for money-laundering red flags.
It also admitted that 149 suspicious matter reports were filed late, or not filed at all.
In addition, the bank breached its obligations to perform checks on 80 suspicious customers and transaction monitoring did not operate as intended on a number of accounts between October 2012 and October 2015.
AUSTRAC‘s investigation also exposed 14 occasions where CBA failed to properly assess risks related to its IDMs.
While many of the transactions were for legitimate purposes, the bank has admitted that it failed to report “millions of dollars of suspected money laundering”.
“AUSTRAC suspects that there was significant further undetected money laundering through CBA accounts that ought to have been detected and reported,” noted the statement of facts agreed between the bank and AUSTRAC.
“The money laundered through the CBA accounts included the proceeds of drug and firearms importation and distribution syndicates predominantly involving methamphetamine.
“Criminal syndicates rely upon money laundering syndicates to import and distribute their drugs.”
‘Acknowledgement of failures‘
The Federal Court still needs to accept the terms of the agreement, but AUSTRAC has heralded the settlement as a warning to other banks.
“I hope this result alerts the financial sector to the consequences of poor compliance, and reinforces that businesses need to take their obligations seriously,” AUSTRAC chief executive Nicole Rose said in a statement.
“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.”
Although, in a later press conference, Ms Rose clearly implied that dealing with CBA had not always been easy, something that was also apparent in AUSTRAC‘s original statement of claim in the Federal Court.
“I think the length of time shows that there were ongoing negotiations,” she said.
“The fact that we chose to take the action we did was entirely appropriate to look at … perhaps the lack of action that had occurred over those years.”
The Commonwealth Bank‘s chief executive, Matt Comyn, acknowledged the seriousness of the breaches and said the bank has so far spent around $400 million trying to fix the problems with technology and people.
“While not deliberate, we fully appreciate the seriousness of the mistakes we made,” he said in a statement.
Commonwealth Bank owns New Zealand‘s ASB Bank.