NAB enters undertaking to lift anti-money laundering controls

National Australia Bank has entered into a court-enforceable undertaking to address failures in the bank’s anti-money laundering regime, following an escalation of the financial crime regulator’s investigation which found widespread non-compliance.

The undertaking ensures NAB improves systems, controls and record-keeping across its anti-money laundering program, including customer identification, customer risk assessment and due diligence, transaction monitoring and governance.

NAB has entered into an enforceable undertaking with AUSTRAC to improve anti-money laundering compliance. Credit: Photo: Will Willitts

The Australian Transaction Reports and Analysis Centre (AUSTRAC) launched a formal investigation into NAB in June last year, where it determined financial penalties were not being considered and on Monday the regulator confirmed this position had not changed.

However, AUSTRAC will monitor NAB’s progress to ensure actions are taken within the required timeframe and maintain ongoing discussions with the bank. Under the terms of the agreement, NAB must complete a remedial action plan by December 31, 2024.

An independent auditor will report to AUSTRAC annually on progress, with the final report to be provided by March 2025. AUSTRAC chief Nicole Rose said the undertaking aims to ensure NAB complies with laws and combats the risk of serious and organised crime.

“National Australia Bank has demonstrated a commitment to uplifting its [anti-money laundering, counter-terrorism financing] controls, and has undertaken significant work identifying and implementing improvements to its programs,” Rose said.

“NAB has worked collaboratively with AUSTRAC throughout the investigation, and this enforceable undertaking will help to ensure NAB meets its compliance and reporting obligations.”

The Age and Sydney Morning Herald revealed NAB had poured significant resources into a bank-wide program, dubbed “Project Apollo”, to update thousands of customer identification documents and correctly risk-rate these accounts.

This program has now been folded into NAB’s broader remediation program, which includes targeting subsidiaries including JBWere Limited, Wealthhub Securities Limited, Medfin Australia Pty Ltd, and AFSH Nominees Pty Ltd.

NAB chief executive Ross McEwan said the bank takes its anti-money laundering obligations “very seriously”.

“We acknowledge the concerns that led to AUSTRAC’s investigation. We will continue to work closely with AUSTRAC as we deliver the agreed further actions.

”We recognise it has taken us longer to fix the concerns raised than it should have. We welcome AUSTRAC’s acknowledgment that NAB has undertaken significant work to date - and we accept that there is more to do.“

McEwan said it was essential that all staff within the bank focused on “getting the basics right”. “Keeping criminals out of the financial system is a top priority for NAB. We recognise our opportunity to better detect, deter and disrupt the flow of illegal money at a time when the threat is evolving at an incredible rate.”

NAB said many of the activities required under the remediation plan, including the remediation of high-risk customers, is expected to be completed within the next 12 months. Other activities required “more time and resources”, the bank said.

CBA and Westpac have been fined a combined $2 billion in recent years following AUSTRAC investigations that revealed systemic non-compliance with anti-money laundering laws. AUSTRAC conducted a report last year that found the overall money laundering and terrorism financing risk for the banking industry remains ‘high’.

Jefferies senior analyst Brian Johnson said the AUSTRAC announcement was good news for shareholders, after the regulator confirmed a financial penalty would not be issued to NAB.

“It’s an unambiguous positive only because it’s not negative. There will be costs involved, but presumably they’ve thought about those and disclosed them in previous guidance.”

NAB shares fell by 1.32 per cent in morning trade to about $32.20.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.