CBA blames coding error for scandal, claims only single breach

CBA is set to argue it’s liable for only a single contravention of money-laundering laws as it points to a coding error.

CBA is claiming a coding error with its intelligent deposit machines. Pic: AAP

Commonwealth Bank has blamed a coding error at it prepares to defend allegations it breached money-laundering legislation.

And it says as a result, it should be liable to only one contravention of the laws, not the 53,506 alleged by Austrac, which has taken Federal Court civil action against Australia’s biggest bank.

A single contravention would mean a liability for the CBA of a penalty of only up to $18 million, not the potential top figure of hundreds of billions of dollars.

CBA’s statements came ahead of a recovery in CBA shares on the Australian sharemarket. After closing 3.9 per cent lower on Friday, the lender’s shares were this morning 0.54 per cent higher at $81.16.

Austrac, the anti-money-laundering agency, alleges CBA’s repeated failures to deal with suspiciously large and repeated cash deposits into its new smart ATM network delayed and hindered enforcement ­efforts, costing agencies intelligence­ and evidence while ­allowing money laundering to continue.

Austrac accuses CBA of “serious and systemic” breaches of money-­laundering and terrorism-­financing laws involving 53,506 transactions, and of failing to monit­or customers suspected of breaches of the law even after it became aware of suspected money laundering.

CBA said today it was carefully reviewing Austrac’s statement of claim before filing a defence.

In a statement early today, CBA pointed to a coding error in the intelligent deposit machines at the centre of the alleged breaches between 2012 and 2015, when it was discovered and fixed.

It said the coding error meant the terminals - which allow anonymous deposits of up to $20,000 in cash at a time to be automatically credited to accounts - did not provide the correct threshold transaction reports to Austrac.

“The vast majority of the reporting failures alleged in the (Austrac) statement of claim relate specifically to this coding error,” it said.

The bank added: “In an organisation as large as Commonwealth Bank, mistakes can be made. We know that because we are a big organisation, these mistakes can have significant impact.”

In a separate statement, CBA said one factor in deciding any penalty was the extent to which any contraventions arose from a single course of conduct.

“For example, Austrac alleges that approximately 53,000 threshold transaction reports were lodged late. Late lodgement carries a penalty of up to $18 million.

“However, these alleged contraventions could be considered to arise from a single course of conduct to the extent that they emanated from the same systems error.”

CBA added: “Ultimately, a court will seek to ensure that, overall, any civil penalties are just and appropriate and do not exceed what is proper having regard to the totality of established contraventions.

“Under the act, the only mechanism available to Austrac to secure a pecuniary penalty from CBA is by taking court action. What we can say about those proceedings is limited until they have run their course.”

AS CBA shares rose after the resumption of trading today, CMC Markets chief strategist Michael McCarthy said investors were forming a more balanced view now that CBA had reviewed the events and said it will defend the allegations.

“We saw an initial knee-jerk reaction to the news but CBA has now released a statement and given the other side of the story,” Mr McCarthy said. “It appears the market overall is taking a more balanced view of the allegations that have been made - nothing has been proven at this stage.

“Having said that though they are underperforming (compared to) the rest of the banks so there is clearly some doubt lingering around this issue.”

With AAP