Austrac widens Commonwealth Bank money laundering case

Austrac has dramatically widened its case against Commonwealth Bank, alleging it failed to monitor suspected terrorist financiers.

CBA is now accused of more than 53,800 alleged contraventions of anti-money laundering laws. Pic: AAP

The anti-money laundering agency has dramatically expanded its suite of allegations against the Commonwealth Bank, with new claims the nation’s largest bank failed to adequately monitor suspected terrorist financiers and alert them to authorities.

Austrac today filed an amended statement of claim against the bank, widening its allegations against the lender from the original claimed breaches of anti-money laundering and counter-terrorism financing laws it lodged in the Federal Court in August.

The bank now faces more than 53,800 alleged contraventions of the anti-money laundering act. Six transactions by five customers made through the Commonwealth Bank’s intelligent deposit machines may have financed terrorism, according to the financial regulator

CBA last night filed its long-awaited defence, admitting to breaching anti-money-laundering legislation 53,506 times, but said it would defend numerous claims brought against it, relating to the number of times it is alleged to have failed to comply with suspicious transaction rules and ongoing due diligence of customers.

But in its amended statement of claim, Austrac has dragged back the time frame in question from May 2012 to December 2011 to capture six more instances where it is alleged CBA failed to run proper risk assessments of its smart ATMs before deploying them.

Austrac’s 600-page statement of claim in early August alleged the lender breached anti-money-laundering and counter-terrorism financing laws by failing to monitor properly tens of thousands of transactions through its smart ATM network. The intelligent deposit machines were rolled out in 2012 without proper coding that would automatically send legally required reports for cash transactions of more than $10,000 to the regulator.

The regulator has now subsequently claimed the bank failed to alert authorities to, and properly monitor, people associated with organised crime groups that were targeted by NSW police in “Strike Force B”, which have resulted in 86 new allegations CBA breached the law. Evidence seized as part of Strike Force B indicates that one of the organised crime groups (a drug and firearms syndicate) that was using the money laundering syndicate controlled by a suspicious person had laundered just under $42 million between March 2016 and August 2016.

CBA is also alleged to have breached the law an additional four times as part of claims it failed to alert authorities to, and properly monitor, people associated with a Vietnamese crime syndicate being investigated by West Australian police.

The bank also faces explosive new claims it breached the law four times for failing to alert authorities to, and to properly monitor, a pair of brothers who were suspected of financing terrorism through transfers of money to Lebanon. Particulars relating to these latest allegations took place as recently as October, when CBA ultimately closed the account of one of the brothers.

CBA is alleged to have failed to send reports to the regulator within 24 hours, sending Austrac a suspicious matter report as much as two weeks after it was due.

“CBA will review the amended statement of claim and update the market as appropriate. We will file an amended defence in due course,” the bank said in a statement on Thursday.

“CBA re-states its position that we take our anti-money laundering and counter-terrorism financing obligations extremely seriously, and deeply regret any failure on our part to comply with these obligations.”

Austrac chief executive Nicole Rose said that the additional alleged contraventions were identified after the civil penalty proceedings were instituted through the regulator’s ongoing investigation into CBA.

“These allegations are very serious and reflect systemic noncompliance over approximately six years,” Ms Rose said.

Ms Rose said Austrac is continuing to work with the CBA to help strengthen its anti-money laundering processes.

The Austrac lawsuit, which drew stinging criticism from Treasurer Scott Morrison, has shaken the nation’s biggest bank. It has also prompted the early exit next year of chief executive Ian Narev, while all of the bank’s top managers were stripped of their bonus payments.

Early exit: outgoing CBA chief Ian Narev. Pic: Kym Smith

A major shareholder class action is also under way and the banking regulator has launched a review of the bank’s culture.

Yesterday, CBA admitting to breaching anti-money-laundering legislation 53,506 times with the late transaction reports. It also confessed to breaches relating to 91 allegations it failed to comply with laws relating to suspicious matter reports, but will contest in court a further 83 allegations. Likewise, the bank will defend 19 allegations concerning a failure to conduct ongoing due diligence of its customers, but has admitted to 52 breaches of the rules.

CBA is estimated to have already set aside about $100 million for the legal case and regulatory compliance stemming from Austrac’s claims.

Along with the Federal Court case, the bank is facing what could be Australia’s largest shareholder class action, as foreshadowed by law firm Maurice Blackburn. It is also under investigation by the Australian Securities & Investments Commission over concerns it breached its disclosure obligations.

It is also undergoing an inquiry into its governance and culture by the prudential regulator APRA, and has confirmed it is in talks with foreign regulators, including those in the US.

The Austrac claims also contributed to momentum for the government’s recently announced royal commission into the financial sector.