Commonwealth Bank class action a step closer

Litigation funder IMF Bentham has formally decided to back a class action against CBA over its money laundering scandal.

Maurice Blackburn’s Andrew Watson announces the potential class action last month. Pic: AAP

Litigation funder IMF Bentham has made a formal decision to back an open class action against the Commonwealth Bank, alleging the lender failed to keep shareholders up to date while making “misleading and deceptive” statements about its compliance with anti-money laundering laws.

IMF Bentham today said it would fund, on a conditional basis, the open class action proposed by Maurice Blackburn against CBA in the Federal Court of Australia, following explosive allegations it breached anti-money laundering legislation.

The potential class action would include shareholders of CBA (CBA) who purchased shares between mid-August 2015, when it is understood the bank first learned it had been failing to send transaction reports to the anti-money laundering agency Austrac, and early August 2017, when the agency filed its allegations in the Federal Court.

IMF Bentham said the class action would allege the bank breached its continuous disclosure obligations when it found out about the transaction report failure, and that the bank made “misleading and deceptive public statements” about carrying out its obligations under anti-money laundering laws.

Class action specialist Maurice Blackburn has said what is potentially Australia’s largest shareholder lawsuit could cost the bank more than $200 million.

Maurice Blackburn’s lawsuit is to be run on an open basis — meaning all of CBA’s 800,000 shareholders who bought stock between August 17, 2015 and August 3 this year, when Austrac filed its bombshell lawsuit — will automatically be included unless they opt out.

Austrac’s 600-page claim alleged the bank failed to report 53,506 transactions to the agency and had its intelligent deposit machines used by criminal syndicates to wash drug money through the bank, which had failed to monitor the suspicious transactions.

Austrac also alleges six transactions were used in terrorism financing, a claim that CBA has disputed. The bank has yet to file a defence.

CBA chairwoman Catherine Livingstone has maintained that, while the board knew about problems with its intelligent ATMs in 2015, the first it knew about Austrac’s legal action was when the law enforcement agency filed in the Federal Court earlier last month.

Austrac claims CBA staff had detailed knowledge of the agency’s investigation into claims that the lender failed to monitor money laundering and terrorism financing through its smart ATM network.

Sky News Business last week revealed confidential documents from an internal CBA review that confirmed it knew of large gaps in its global transaction monitoring compliance.

The internal review of the bank’s compliance with Australian and global anti-money laundering and terrorism financing laws, presented to senior executives in February and obtained by Sky News Business, revealed that billions of dollars worth of transactions in the US, Europe and Asia were not being monitored, which could put the bank in the firing line of global regulators.

A team of ASIC investigators has been formed in Sydney to focus on three key issues related to the Austrac allegations — whether CBA breached its continuous disclosure obligations or its AFSL licence responsibilities and if the bank’s directors carried out their full duties.

The Australian Prudential Regulation Authority also announced a panel will conduct a six-month inquiry into CBA’s culture and governance.