CBA chief says no bank wants to facilitate 'heinous crimes'

Commonwealth Bank chief executive Matt Comyn has said no financial institution wants to be exposed for facilitating appalling crimes, yet the bank still regards failure to comply with anti-money laundering laws among its top compliance risks.

Mr Comyn said CBA had committed an enormous amount of money and effort to improving its anti-money laundering compliance and pledged to continue investing to manage its procedures.

"This is an area alongside cyber that is at the absolute heart of what financial institutions need to be able to manage," Mr Comyn told the Trans-Tasman economic summit on Monday. "There is a lot of complexity that comes with it but it really means we’ve seen the severity, not just of the penalties, but also what happens if it's not managed well."

CBA chief Matt Comyn said no bank wants to facilitate heinous crime.Credit: Louie Douvis

CBA was fined $700 million in 2018 after the financial crimes regulator AUSTRAC found the bank's cash-deposit machines were being used by criminals including drug and firearms importers. AUSTRAC's legal action paved the way for a prudential review into the bank's culture that found systemic failures in its approach to risk. CBA was hit with two class actions and its recent annual report says it is "currently not possible to determine the ultimate impact of these claims".

CBA has committed to boosting staff training for spotting money laundering and terrorism financing, yet the bank's most recent annual report lists failure to comply with AML laws among its top three compliance risk exposures.

"There’s an enormous amount of effort that’s going into making sure we comply with this critically important AML and CTF laws," Mr Comyn said. "From our perspective, it’s been a very substantial investment over many years now responding to some of our identified shortcomings."

The comments come as Westpac settled the largest fine in corporate history after AUSTRAC found it had breached anti-money laundering laws 23 million times by failing to properly report suspicious payments linked to its correspondent bank partners, some used to pay for live child sex shows in the Philippines.

The scandal cost Westpac chief Brian Hartzer and chair Lindsay Maxsted their jobs and has triggered two major shareholder class actions.

"Of course no financial institution wants to find itself ... facilitating any of those heinous crimes," Mr Comyn said.

The approach taken by major banks towards anti-money laundering compliance has been thrust into the spotlight after an investigation by The Age, Sydney Morning Herald, New York Times and 60 Minutes found Westpac had maintained a correspondent bank relationship with Puerto Rican-based Euro Pacific until 2018.

Westpac overlooked a number of red flags to partner with the offshore bank, including the bank's location in a known tax haven and a president with a history of misconduct.

Euro Pacific is now at the centre of the largest multi-national investigation into tax evasion and money laundering and is regarded as the highest threat to Australia's national security by the Australian Criminal Intelligence Commission.

Australian Tax Office deputy commissioner Will Day said it was more important than ever to stamp out tax evasion and financial crime.

"We never lose sight of the fact that tax crime is not victimless," Mr Day said. "Tax criminals take away from that revenue that supports those really important functions. I guess that's important at any time, but even more so during a pandemic."

CBA's annual report said social distancing restrictions had made it harder to comply with customer verification obligations under the AML-CTF Act and special relief, including video calls, had been provided by AUSTRAC.

"There is currently a higher risk of financial crime because of increased opportunities through the number of financial support packages available, combined with an increase in the number of vulnerable people and businesses," CBA's annual report said.

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