NAB untouched but wary of Austrac investigations

National Australia Bank is the outlier of the four major banks, avoiding a dreaded Austrac statement of claim.

Jefferies analyst Brian Johnson said investors know that NAB has an Austrac issue — they just yet don’t know what it involves.

National Australia Bank is the outlier of the four major banks, avoiding a dreaded Austrac statement of claim despite disclosing a contingent liability in its accounts for three consecutive years.

The disclosure mentions a significant program of work to strengthen the bank’s anti-money laundering and counter-terrorism financing program after a number of compliance breaches were reported, including weaknesses with know-your-customer requirements, other financial crime risks and systems and process issues affecting transaction monitoring and reporting.

“As this work progresses, further issues may be identified and additional uplifting and strengthening may be required,” NAB says.

“The potential outcome and total costs associated with the investigation and remediation process for specific issues identified to date, and for any issues identified in the future, remain uncertain.”

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While the contingent liability doesn’t appear to be deeply threatening to NAB, analysts have pointed out that the same applied to Westpac and Commonwealth Bank before it.

Both banks have claimed to varying degrees that they were blindsided by Austrac in relation to the scale and nature of their alleged breaches.

Westpac, for example, said over the weekend that Austrac had requested information and documents in relation to a number of customers.

However, the bank first learnt on November 15 about the agency’s concerns in relation to the 12 customers linked to child exploitation, and it was not provided with any specific allegations until it received a statement of claim on Wednesday last week.

Jefferies analyst Brian Johnson said investors know that NAB has an Austrac issue — they just yet don’t know what it involves.

He noted that when Phil Chronican took over the role of acting chief executive last February, he made it a priority to deal with outstanding customer remediation issues.

“I suspect he’s probably done the same with Austrac, but we can’t be 100 per cent sure that he knows everything that Austrac is thinking,” Mr Johnson said.

Under accounting standards, NAB is not required to make a provision until there is some basis for estimating its size.

Appearing before the house economics committee earlier this month, Mr Chronican said Austrac was working closely with NAB to understand the issues that had arisen and what was being done to fix them.

“The point of putting the note into the contingencies is to make sure our shareholders and the public are generally aware that this is a potential area, but we’ve no basis of knowing whether enforcement action is going to come and no basis of knowing, if enforcement action came, what penalty might be applied,” he said.

Mr Chronican said at the bank’s full-year profit announcement that NAB was making sure it complied with the spirit as well as the letter of the law by reporting a range of issues to Austrac even when it was not strictly required to do so.

ANZ, meanwhile, remains the only one of the big four not to make similar disclosures, or experience Austrac’s wrath in the Federal Court.

“We are not aware of any impending action by Austrac,” an ANZ spokesman said on Monday.