CBA reveals it was give 15 minutes notice it faced an Austrac fine

Austrac called CBA’s Ian Narev just 15 minutes before lobbing a bombshell charge against the bank, the Federal Court has heard.

Commonwealth Bank of Australia CEO Ian Narev resigned in the wake of an ATM scandal. Picture: by James Croucher

Former Commonwealth Bank boss Ian Narev was given just 15 minutes’ notice before Australia’s top financial cops dropped bombshell charges on the bank over its failure to police thousands of questionable transactions.

The Federal Court has heard CBA repeatedly sought assurances from the Australian Transaction Reports and Analysis Centre over two years as the regulator prepared its case against the bank.

CBA has argued the late notice from Austrac, which kept the bank guessing for years, showed the lender was not in a position to update the market pre-emptively.

The argument was made as the bank opened its submissions in a Federal Court Class action, launched against the bank by Maurice Blackburn lawyers who argue CBA failed to reveal to investors that it was under the guns of Austrac.

When news of Austrac’s investigation and charges against the bank went public in August 2017, shares in CBA slid 5.4 per cent over four days.

Maurice Blackburn lawyers argue this caused a destruction in shareholder wealth and CBA should have taken steps to inform the market that it was under investigation by Austrac and faced stiff financial penalties.

Austrac fined CBA $700m after it found the bank had contravened anti-money laundering and counter-terrorism financing rules on at least 53,750 occasions.

The bank was also forced to hold an extra $1bn capital on its books by the Australian Prudential Regulatory Authority after the money laundering breaches brought the bank into disrepute.

Appearing for CBA, Noel Hutley SC said if the bank had put out a market update about the Austrac investigation it risked promulgating vague and potentially damaging information which could spur the regulator to act against the bank.

“It would be improper to go out and say what our learned friends say because it would be wholly misleading,” he said.

“It would have misled the market implicitly because it would not make clear what Austrac had said.”

Mr Hutley said Austrac had initially told CBA that it would give advance notice to the bank once it had decided which course to pursue — whether to take civil action or seek an enforceable undertaking.

But Mr Hutley revealed that nearly two years later Austrac’s then deputy chief executive Peter Clark told CBA the regulator was “proposing to depart from the assurance to the bank that the bank will be given appropriate time to consider a response”.

Reading from Mr Narev’s evidence, Mr Hutley revealed the former CEO of CBA was called by Mr Clark just 15 minutes before the regulator put out its press release and filed court papers against the bank.

“Mr Narev told Mr Clark ‘that is the opposite of what you said you would not do’,” Mr Hutley said.

Mr Hutley said Mr Narev then texted CBA’s former chair Catherine Livingstone to tell her the bank was about to be hit with formal action by Austrac.

“The text says thanks, unfortunately I’ve just come off the phone with Austrac and despite all the assurance they are using the proceedings and a media release today. I will let you know when I know more,” Mr Narev wrote.

Days after the Austrac case, hit Mr Narev announced he would resign before June 2018.

The hearing continues.