CBA still breaching anti-laundering laws: Austrac

Commonwealth Bank is still breaking anti-money laundering and counter-terrorism financing laws, Austrac says.

CBA is alleged to have failed to run proper risk assessments of its smart ATMs.

Anti-money laundering agency Austrac yesterday dramatically broadened the suite of allegations against Commonwealth Bank it first lodged in the Federal Court in August, to include further instances where organised crime groups dealing in drugs and firearms and convicted terrorists allegedly washed money through CBA’s intelligent deposit machines.

The additional alleged contraventions are still ongoing, and Austrac chief executive Nicole Rose said they were identified after the civil penalty proceedings were launched and through the regulator’s ongoing investigation into CBA. “These allegations are very serious and reflect systemic non-compliance over approximately six years,” Ms Rose said.

In its amended statement of claim, Austrac has also dragged back the timeframe in question from May 2012 to December 2011 to capture six more instances in which it is alleged CBA failed to run proper risk assessments of its smart ATMs before deploying them. The amended claim made 100 further allegations of contravention against the bank, taking the total number of alleged breaches to more than 53,800. Each breach carries a potential fine of $21 million.

Despite receiving the lawsuit in early August, CBA, which this week said it would defend itself against numerous allegations, is still claimed to be breaching the law, according to Austrac.

The anti-money-laundering laws in question required CBA to regularly assess and review the risks posed by its intelligent deposit machines.

CBA was legally required to consider Austrac guidance and feedback and significant instances of laundering and terrorism financing as part of these reviews.

Austrac has alleged “at least” six periods when CBA “should have, but did not” follow these rules, which run consecutively from May 2012 to July this year. But the statement then adds: “The contravention is ongoing.”

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Revelations the bank is still allegedly contravening the law come as CBA confessed to many of Austrac’s original allegations while stressing its commitment to anti-money-laundering compliance. “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.

“CBA restates 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.”

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

Austrac’s 691-page statement of claim alleges the lender failed 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.

Six transactions by five customers made through the machines may have financed terrorism, according to the financial regulator.

CBA on Wednesday 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 due diligence of customers.

But the bank also now faces explosive new claims it breached the law four times for failing to alert authorities to, and to properly monitor, brothers who were suspected of attempting to finance terrorism through transfers to Lebanon.

CBA has flagged a customer who was thought to be “guilty of creating an illegal association, together with three other Lebanese, in order to carry out activities harming state security”. Particulars relating to these latest allegations took place as recently as October, when CBA ultimately closed the account of one of the brothers, after Austrac filed its initial suit against the bank in August.

Action on the account was stopped a week after the initial claims were made in August and analysts in the bank’s team stopped transfers of money in June. However, it is alleged money was still able to be withdrawn from the suspect account from a western Sydney CBA branch in August.

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

The regulator has also 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 alleged law breaches.

Evidence seized as part of Strike Force B indicates one of the organised crime groups — a drug and firearms syndicate — using the money-laundering syndicate had laundered just under $42m between March and August last year.

CBA faces an additional four claims it failed to alert authorities to, and properly monitor, people associated with a Vietnamese crime syndicate under WA police investigation.

Fitch Ratings yesterday said CBA’s defence was “in line” with expectations and said it would “examine any additional alleged contraventions to determine if they indicate wider risk management failings at the bank.”

The ratings agency said any negative credit rating would “most likely be driven by a broader reassessment of the bank’s risk management framework and corporate culture” or by lasting franchise damage caused, rather than from sanctions and fines.

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.

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