CBA defeats class action over money laundering disclosure

CBA has declared victory in a long-running shareholder class action over allegations it breached disclosure obligations relating to anti-money laundering compliance.

Commonwealth Bank of Australia has declared victory in a long-running shareholder class action over allegations it breached continuous disclosure obligations in relation to anti-money laundering compliance and counter-terrorism financing.

Federal Court judge David Yates dismissed the action brought against CBA by Maurice Blackburn, which argued the bank had failed to inform the market about the risk it faced once regulators caught wind of the anti-money laundering and counter-terrorism financing failure.

CBA was penalised $700m in 2018 after the Australian Transaction Reports and Analysis Centre took action against the bank when it found it had contravened anti-money laundering and counter-terrorism financing rules on at least 53,750 occasions.

Maurice Blackburn had argued the bank should have told investors about the potential for a massive financial hit arising from regulatory action before it faced the action in 2017.

The bank was also hit with additional capital treatment requirements by the Australian Prudential Regulatory Authority, which ordered CBA to hold an extra $1bn on its books after “a series of incidents damaged the bank’s public standing”.

CBA was only able to shed the last $500m of the additional capital in September, after the bank proved to APRA it had cleaned up its act.

Maurice Blackburn sued the bank on behalf of a suite of shareholders, including Zonia Holdings, Philip Anthony Baron and Joanne Baron, claiming the bank’s actions saw a destruction in shareholder wealth, with shares in the bank falling 5.4 per cent to $84.69 over several days in the wake of the revelation Austrac had taken action against the bank.

Justice Yates held he was not satisfied the bank had breached its disclosure obligations or acted in a misleading or deceptive manner.

“I am not satisfied that the information, in any of its pleaded forms, was information that, if disclosed at the relevantly pleaded times, would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of CBA shares,” Justice Yates said.

“More generally, I am not satisfied that the information, in any of its pleaded forms, was information that a reasonable person would expect to have a material effect on the price or value of CBA shares if that information were to have been generally available at the relevantly pleaded times.”