CBA to pay record $700m to settle money-laundering case

Commonwealth Bank of Australia has agreed to pay a record $700 million fine to settle the explosive anti-money laundering case brought against it by the government’s financial intelligence agency.

As part of the deal, CBA also admitted to a host of breaches, including that millions of dollars were laundered through its ATMs by criminals including drug and firearms importers.

CBA last month said it would enter into mediation with Austrac.Credit: James Allcock

If approved by the Federal Court, the fine will be the biggest civil penalty imposed in Australian history, dwarfing the previous record of $45 million paid by Tabcorp to settle its money-laundering case with Austrac in February last year.

Prime Minister Malcolm Turnbull said the "huge" fine showed government agencies were taking action and that the financial sector would be held to account for any wrongdoing. "I just want to say, once again, that we will not tolerate wrongdoing in the financial services sector. Where it has occurred, we will ensure those who are responsible are held to account," Mr Turnbull said.

The bombshell allegations against CBA, lodged last August, included thousands of breaches of anti-money laundering rules, and were a major blow to its already damaged reputation. Former chief executive Ian Narev left the bank soon after the shock allegations, which also caused a slump in its share price, and helped trigger a powerful prudential review of CBA's culture and governance.

CBA chief executive Matt Comyn on Monday said while the bank's actions weren't deliberate, "we fully appreciate the seriousness of the mistakes we made".

"Our agreement today is a clear acknowledgement of our failures and is an important step towards moving the bank forward," he said in a statement. "On behalf of Commonwealth Bank, I apologise to the community for letting them down."

The settlement includes an admission that CBA failed to properly file more than 53,000 reports to Austrac over cash deposits of more than $10,000 in its ATMs. It also admitted that 149 “suspicious matter reports” were filed late, or not at all, and owned up to failings in its risk management and ongoing monitoring of customers.

As part of the settlement, CBA said during the time it had failed to introduce a daily limit on how much customers could deposit, "several million dollars" of money-laundering occurred through its "intelligent" deposit machines.

"The money laundered through the CBA accounts included the proceeds of drug and firearms importation and distribution syndicates – predominantly involving methamphetamine. Criminal syndicates rely upon money-laundering syndicates to import and distribute their drugs," a statement of agreed facts said.

CBA also admitted it had been too slow to close an account it suspected was linked to terrorism financing. Austrac said it suspected there was "significant further" laundering through CBA accounts that went undetected and unreported.

The statement acknowledged that CBA had beefed up its internal systems for combating financial crimes, including introducing a daily limit on cash deposits into its intelligent deposit machines of $10,000.

The bank will pay Austrac's $2.5 million legal costs.

Austrac chief executive Nicole Rose said the fine should send a message to the industry over the seriousness of companies' anti-money laundering compliance.

"I hope that CBA actually becomes an example of not just complying with the obligations but being at the forefront of future efforts to combat financial crime and terrorism."

Relieved investors, who had been bracing for a higher fine, pushed the bank's shares 1.4 per cent higher, to $69.69.

Portfolio manager at Regal Funds Management, Omkar Joshi, said the fine would act as a deterrent to the bank and others in the sector, but that amount was "more than adequately" already factored into the bank's share price.

"It's big enough to make a statement, it's a good outcome for Austrac. At the same time, for CBA, they won't be repeating the mistakes, but from a share price perspective it does not mean much," Mr Joshi said.

The bank had set aside $375 million to cover the potential fine in its half-year results, and on Monday said it would take a $700 million provision in its full-year accounts, due in August.