Yesterday, CBA and AUSTRAC announced that they had reached an agreement to settle the federal court case AUSTRAC brought against the major bank 10 months ago.
In 3 August 2017, the government agency accused CBA of over 53,700 contraventions of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) for failing to carry out AML/CTF financing risk assessments prior to rolling out intelligence deposit machines (IDMs), which facilitate anonymous cash deposits.
“CBA failed to give 53,506 threshold transaction reports to AUSTRAC on time for cash transactions of $10,000 or more through IDMs from November 2012 to September 2015,” AUSTRAC said in August.
“AUSTRAC alleges that the bank failed to report suspicious matters either on time or at all involving transactions totalling over $77 million.”
The two parties resolved the civil proceedings yesterday, with a statement from the major bank saying it admitted to “further contraventions of Australia’s AML/CTF Act, beyond those already admitted”.
Commenting on the resolution, Treasurer Scott Morrison called the admissions “serious and significant”.
“They are very serious admissions,” he said. “I think the point we have been able to reach, particularly through the actions of AUSTRAC and the prosecutors, provide[s] for an appropriate recognition of what has been a very egregious episode, a very egregious episode in the conduct of the CBA.”
AUSTRAC commences civil proceedings against CBA
On 4 August 2017, the major bank released a short statement saying it was preparing a “statement of defence” in response to AUSTRAC’s allegations.
Commonwealth Bank’s board then released a statement on 9 August outlining actions the bank had taken to address the AML/CTF Act contraventions, such as having “promptly fixed” the relevant coding error in 2015 when CBA had become aware of it; shaking up senior leadership positions; and the establishment of a sub-committee overseeing CBA’s response to the AUSTRAC case.
On 23 August, plaintiff law firm Maurice Blackburn and litigation funder IMF Bentham announced they were set to launch a class action against the bank over the allegations.
CBA responds, challenging some AUSTRAC claims
CBA released its response to the civil proceedings on 13 December, stating: “we contest a number of allegations but admit others”.
In its defence, the major bank admitted it failed to file the 53,506 threshold transaction reports (TTRs) on time – but argued that they had all been caused by the same single systems-related error.
CBA also admitted to 91 allegations relating to suspicious matter reports (SMRs) but denied 83; and admitted to 52 allegations relating to ongoing customer due diligence (OCDD) requirements but denied 19.
AUSTRAC files new allegations
On 18 December, AUSTRAC expanded its case, filing a further 100 allegations against the bank and bringing the count to “over 53,800” contraventions of the AML/CTF Act.
The amended statement of claim comprised of six further IDM risk management obligations; 38 more contraventions of OCDD obligations; and 56 further contraventions of SMR obligations.
Two months later, on 23 February, the major bank denied 89 of the 100 new charges – and admitted 11 of them only in part.
At this point, the bank was conceding it contravened s 82(1) and s 43(2) of the AML/CTF Act.
In light of AUSTRAC’s new charges, the financial intelligence agency now alleged 230 failures relating to SMRs, 132 of which CBA was now denying; as well as 109 OCDD-related failures, 53 of which CBA was denying in full.
On 25 May, CBA issued an update on its mediation discussions with AUSTRAC, stating that “discussions are continuing”.
Case closed
4 June saw the civil proceedings between the two parties resolved and “otherwise dismissed”.
In the accompanying Statement of Agreed Facts and Admissions, CBA has ultimately admitted it:
- contravened s 82(1) of the Act on 14 instances;
- contravened s 43(2) of the Act on 53,506 instances by failing to provide TTRs on time;
- contravened s 82(1) of the Act between 20 October 2012 and 12 October 2015 by faliing to comply with provisions of Part A of its AML/CTF program;
- contravened s 41(2)(a) of the Act on 149 instances by failing to submit SMRs on time (51 more instances than it admitted on 23 February); and
- contravened s 36(1) of the Act between 15 December 2011 and 1 February 2018 on 80 instances by failing to monitor customers regarding ML/TF risks (24 more instances than it admitted on 23 February).
Commenting on the outcome, AUSTRAC chief executive Nicole Rose expressed her hope that the outcome would serve as a warning to the industry.
“As we have seen in this case, criminals will exploit poor business practices to launder the proceeds of their crimes,” she said, adding that money laundering and terrorism financing had “real impacts” on everyday Australians as it enabled “organised crime groups to peddle drugs to our families and friends”.
With businesses serving as the “first line of defence”, it was crucial that businesses embedded AML/CTF compliance and risk management into their practices and operations.
“I hope this result alerts the financial sector to the consequences of poor compliance, and reinforces that businesses need to take their obligations seriously.
“In the end our role is about protecting the community and we take this role seriously.”
