Federal Court dismisses disclosure class actions against CBA

The Federal Court has dismissed two shareholder class actions against the Commonwealth Bank over what it told investors about its compliance with anti-money laundering and counter-terrorism financing (AML/CTF) laws before bombshell legal action was launched against the bank in 2017.

A landmark case from regulator AUSTRAC in 2017 sparked heavy falls in CBA’s share price, prompting law firm Maurice Blackburn to launch a class action alleging the bank knew about major AML/CTF failings in years before the AUSTRAC case, but had failed to properly disclose these to investors.

CBA has had a win in the Federal Court, which dismissed two shareholder class actions against the bank.Credit: Bloomberg

CBA settled the case with AUSTRAC in 2018 for $700 million, which at the time was a record corporate penalty in Australia.

Maurice Blackburn’s case, which later joined with a separate class action from litigation firm Phi Finney McDonald, focused on what CBA had disclosed to investors before AUSTRAC took CBA to court.

The actions alleged that between mid-2014 and when the AUSTRAC case was launched in August 2017, CBA had information about what were later found to be breaches of the AML/CTF laws, and it was claimed CBA had breached its continuous disclosure obligations.

The cases also claimed that if the information about AML/CTF compliance had been disclosed on the ASX, it would have had a “material” effect on CBA’s share price.

But on Friday, Federal Court Justice David Yates found in favour of CBA, ruling that even though the bank was aware of problems with its AML/CTF systems before AUSTRAC’s 2017 case, it had not breached its continuous disclosure obligations. Justice Yates also said he was not satisfied that this information, if it had been released to the market, would be likely to influence people investing in CBA shares.

Justice Yates also dismissed claims of misleading and deceptive conduct, which focused on CBA telling the market it had the policies and systems to comply with regulatory requirements.

Shares in CBA, which has denied the allegations, had risen 0.8 per cent to $117.99 on Friday afternoon.

CBA noted the decision in an ASX announcement on Friday, while a spokesman for Maurice Blackburn signalled the ruling could be appealed. “The legal team will take time to consider the decision carefully, with a view to an appeal,” he said.

The allegations against CBA were tested in a 2022 trial, in which internal CBA documents were examined and bankers were questioned about the bank’s adherence to anti-money laundering obligations.

Friday’s ruling comes after CBA was this week the last major bank to update investors on its profits, which slipped 5 per cent to $2.4 billion in the March quarter amid a squeeze on profit margins.

Elsewhere in financial services, insurance giant QBE on Friday said premiums were increasing by 11 per cent in its Australian business, as the industry continues to push through hefty price rises due to costs from labour and materials, damage from natural disasters and reinsurance expenses.

At its annual shareholder meeting, QBE reiterated its profit guidance and said Australian premiums were up 11 per cent in the year to date, down from 13.9 per cent in fourth quarter of 2024. Across the entire QBE group, much of which is overseas, premiums were up 7.3 per cent in the year to date.

QBE chairman Mike Wilkins says higher frequency of catastrophes, rising cost of materials and labour, and higher reinsurance costs are all pushing insurance premiums higher.Credit: Louise Kennerley

Soaring insurance costs have helped drive up Australia’s inflation rate, and chairman Mike Wilkins acknowledged the cost-of-living pressure on households, while pointing to the broad threat from climate change.

“The persistency of catastrophes, the rising cost of materials and labour and higher reinsurance costs are all contributing to the cost of premiums,” Wilkins said.

“QBE and the insurance industry have been advocating for measures that reduce natural peril risk and increase mitigation and community resilience as this is critical to address insurance affordability and accessibility.”

QBE and other insurers have called for greater investment infrastructure to protect communities from disasters, such as flood levees and changes to land-use rules and building standards to make homes more resilient.

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