CBA has reached an agreement with AUSTRAC to pay a $700 million penalty to settle a federal court case brought by the regulator in August 2017.
In a statement, AUSTRAC said that if agreed by the federal court "this will represent the largest ever civil penalty in Australian corporate history".
The allegations are related to the misuse of CBA's 'intelligent deposit machines' (IDMs), which were capable of accepting 200 notes per deposit, or up to $20,000 per cash transaction.
Investigations by AUSTRAC, in partnership with the Australian Federal Police, the NSW Police Force and the Western Australia Police, identified that CBA’s IDMs were being used to launder the illicit proceeds of crime, including for terrorism.
As part of the agreement, CBA will pay a civil penalty of $700 million together with AUSTRAC's legal costs of $2.5 million.
CBA chief executive Matt Comyn said that while the breaches were "not 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."
"On behalf of Commonwealth Bank, I apologise to the community for letting them down," Mr Comyn said.
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