Commonwealth Bank of Australia has agreed to a A$700 million ($759m) penalty to resolve Federal Court proceedings relating to serious breaches of anti-money laundering and counter-terrorism financing laws, says the Australian Transaction Reports and Analysis Centre
If agreed by the Federal Court this would represent the largest ever civil penalty in Australian corporate history, according to the centre (AUSTRAC).
Commonwealth Bank of Australia (CBA), the parent of ASB bank, had admitted it contravened the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 on 53,750 occasions, AUSTRAC said.
The parties would jointly approach the Federal Court seeking orders and it was anticipated that a hearing on the penalty would be scheduled in the coming months.
The financial intelligence agency said its enforcement action against CBA followed "exhaustive investigations" into the bank's anti-money laundering and counter-terrorism financing compliance and risk management practices, particularly in relation to its Intelligent Deposit Machines (IDMs).
The investigations, undertaken in partnership with the Australian Federal Police, NSW Police Force and Western Australia Police, identified that CBA's IDMs were being used to launder the illicit proceeds of crime, it said.
AUSTRAC chief executive Nicole Rose said the outcome sent a strong message that serious non-compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act would not be tolerated.
"As we have seen in this case, criminals will exploit poor business practices to launder the proceeds of their crimes," 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," she said.
"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.
"I hope this result alerts the financial sector to the consequences of poor compliance, and reinforces that businesses need to take their obligations seriously."
CBA chief executive Matt Comyn said the agreement brought certainty to one of the most significant issues the bank had faced.
"While not deliberate, we fully appreciate the seriousness of the mistakes we made," Comyn said.
"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.
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 bank was committed to build on significant changes made in recent years as part of a comprehensive program to improve operational risk management and compliance, he said.
To date it had spent more than A$400 million on "systems, processes and people relating to AML/CTF compliance and will continue to prioritise investment in this area".
CBA said that it would also pay AUSTRAC's legal costs of A$2.5m.
Rose said AUSTRAC's focus was to work collaboratively with and support industry to deter criminal activity and welcomed CBA's decision to commence work on a program to address their compliance failings.
"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."
AUSTRAC said that in summary CBA accepted that:
• It failed to carry out an appropriate assessment of the money laundering and terrorism financing (ML/TF) risks of its IDMs prior to October 2017.
• It failed to complete the introduction of appropriate controls to mitigate and manage the ML/TF risks of IDMs prior to April 2018.
• It failed to provide 53,506 threshold transaction reports to AUSTRAC on time for cash transactions of A$10,000 or more through IDMs from November 2012 to September 2015, having a total value of about A$625 million.
• For a period of three years, it did not comply with the requirements of its AML/CTF program relating to monitoring transactions on 778,370 accounts.
• It failed to report suspicious matters on time, or at all, involving transactions in the tens of millions of dollars.
• Even after it became aware of suspected money laundering or structuring on CBA accounts, it did not monitor its customers to mitigate and manage ML/TF risk, including the ongoing ML/TF risks of doing business with those customers.