CBA’s terror ‘breaches’ after lawsuit

The Commonwealth Bank has allegedly continued to breach anti-money-laundering laws, as fresh claims emerged yesterday.

The anti-money-laundering agency yesterday expanded its suite of allegations against the CBA.

The Commonwealth Bank has ­allegedly continued to breach anti-money-laundering laws, as fresh claims emerged yesterday that it had allowed more than $6000 to be withdrawn from an account it had suspected for months belonged to a convicted terrorist.

The bank allegedly allowed the cash to be drained from the ­account — after CBA was hit with a lawsuit alleging more than 53,000 breaches of anti-money-laundering legislation — despite having placed a stop on the ­account after several attempts to transfer money to Lebanon.

The anti-money-laundering agency yesterday expanded its suite of allegations against the nat­ion’s largest bank, with new claims that CBA failed to ade­quately monitor suspected terrorist financiers and organised crime gangs, and properly alert it about large transactions.

Although the lawsuit has already resulted in chief executive Ian Narev’s decision to leave the role early and caused top managers to be stripped of their bonus payments, the bank subsequently failed to stop the flow of funds from ­accounts linked to criminals and terrorists.

In its amended statement of claim filed in the Federal Court yesterday, Austrac alleged the breaches began as early as ­December 2011, and were ongoing. An Austrac spokeswoman said: “I can confirm that in ­relation to the ­alleged contraventions under ­section 82 of the act by CBA, that, as of the date of lodgement of ­Austrac’s amended statement of claim (that is, today), Austrac’s ­contention is that the issue has not been resolved and the ­contravention therefore remains current.”

In a statement yesterday, CBA said it would review Austrac’s amended statement of claim and reiterated that it took its anti-money-laundering and counter-terrorism financing obligations “extremely seriously”, and deeply regretted any failure to comply with them.

The bank has been hit with fresh allegations it allowed a major money-laundering syndicate to wash tens of millions of dollars for organised crime gangs through its ATMs and intelligent deposit machines, or IDMs.

Evidence seized by NSW police indicates one of the gangs, which peddled drugs and firearms, laundered almost $42 million in just five months last year.

According to the amended statement of claim, the bank updated Austrac only last month about deposits made in September and October, totalling $119,000, into one of the accounts.

These were made despite Austrac launching its lawsuit on Aug­ust 3, and NSW’s organised crime squad seeking information about the account in April.

The bank also allegedly let a Vietnamese crime syndicate in Western Australia launder $650,000 through its branches and IDMs without properly alerting Austrac or monitoring its transactions.

It also faces explosive new claims it breached the law by failing to properly monitor two brothers suspected of terrorism fin­ancing. One of the brothers, based in Australia, opened a CBA account in 2014 and was allegedly able to make 120 large cash withdrawals totalling more than $3m without any monitoring by the bank.

His account was not closed until October — more than two months after Austrac launched its lawsuit against the bank and almost four months after identifying his possible terrorist links. The man was also able to open an ­account in the name of his brother, who was jailed for three years in Lebanon in 2005 for ­belonging to a terrorist ­organisation, ­planning terrorist acts and possession of suspicious arms.

The account was opened this year, even though the brother had been out of the country since 1999, without the bank carrying out any due diligence.

The bank became aware in June that activity on the account could be related to terrorism ­financing, after an unsuccessful attempt was made to transfer money to Lebanon. Despite this suspicion, on July 10, the bank gave 30 days’ notice it planned to close the account, ­during which time a further two attempts were made to transfer money to Beirut.

It was not until August 9 that the bank finally put a stop on the account. However, it then let $6225 be withdrawn at the bank’s branch in Bankstown, in Sydney’s southwest, and on September 11 a cheque for $4900 was mailed to the first brother’s address.

The bank had also recommended it retain its customer relationship with the first brother, despite suspecting he was linked to terrorism and numerous large cash withdrawals and transfers.

The CBA on Wednesday night filed its long-awaited defence to Austrac’s ­initial 53,700 money-laundering allegations, admitting to 53,506 breaches of the legislation it said were caused by a ­single ­systems-related error in its smart deposit machines, and other breaches, including a failure to adhere to risk assessment ­requirements.

However, the bank said it would defend numerous other claims brought against it, including in relation to ongoing due diligence of customers.

“During 2017, we have stepped up the rigour and intensity of the program and extended it across all aspects of financial crime obligations and all business units to further strengthen regulatory compliance,” CBA said.

The total alleged breaches have increased to about 53,800. Austrac’s original 600-page statement of claim in August ­alleged the lender breached laws by failing to monitor properly tens of thousands of transactions through its smart ATM network.

The IDMs 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.

Austrac chief executive Nicole Rose said the extra alleged contraventions were identified after the civil penalty proceedings were instituted.

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

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

The Austrac lawsuit, which drew criticism from Scott Morrison, has shaken the nation’s biggest bank, and has prompted a review of its culture by the banking regulator and an investigation by the Australian Securities & ­Investments Commission into possible breaches of its disclosure obligations.

It is also facing a major shareholder class action.

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

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