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The Commonwealth Bank has fired back at Australia's financial intelligence agency AUSTRAC, rejecting the bulk of fresh allegations made over breaches of money laundering and anti-terrorism funding laws.
Key points:
- CBA says it accepts in part only 11 of 100 new allegations laid by the financial intelligence agency
- The banks says it has spent more than $400 million on its compliance systems to fight financial crime in recent years
- CBA rejects all claims made in investor class action, saying it complied with continuous obligation disclosures to the market at all times
The CBA lodged its response in the Federal Court to a fresh batch of serious allegations AUSTRAC made late last year, including transactions involving a known terrorist and the regular use of so-called intelligent deposit machines (IDMs) by "drug mules", as well as drug and firearm criminal gangs.
"In our amended defence in the AUSTRAC matter, we deny the majority of the 100 additional allegations," CBA said in a statement issued to the ASX.
Of the additional 100 claims made by AUSTRAC, the CBA denies all but 11.
CBA concedes it was lax on some suspicious matters
The CBA fought back on the 230 "suspicious matter reporting" (SMR) allegations made by AUSTRAC, saying it accepted fewer than 100.
One of the fresh SMR allegations AUSTRAC made centred on the attempts by a customer to transfer money to his brother who been convicted on terrorism charges in Lebanon.
AUSTRAC alleged that despite the CBA being aware of the potential breach on June 26 last year, a stop was not put on the account concerned until well into August.
AUSTRAC also alleged the CBA was slow to act on a money laundering operation through ATMs and IDMs by a crime gang identified by NSW Police.
"The money mules made structured cash deposits into the CommBank accounts identified … to launder the funds of the drug and firearms syndicate," AUSTRAC alleged in its December court filing.
CBA says it take obligations extremely seriously
The bank said it understood it played a key role in law enforcement and took its anti-money laundering and counter-terrorism financing (AML/CTF) obligations extremely seriously.
"During the period covered by AUSTRAC's claim and to the end of 2017, we submitted more than 19 million reports to AUSTRAC, including over 4 million last year alone," the bank said.
"During the same period we submitted more than 40,000 suspicious matter reports.
"We also fulfilled more than 20,000 requests for assistance from law enforcement agencies last year."
The bank added it had spent more than $400 million in financial compliance systems to counter financial crime over the past eight years, and employed hundreds of personnel dedicated to detecting and disrupting financial crime.
The bank accepted that it was late in filing more than 53,500 late threshold transaction reports, but it should be treated as one contravention by the Federal Court.
Banks are required to report any transaction above $10,000 made through an ATM to AUSTRAC within 10 days.
It also agreed it not adequately adhere to risk assessment requirements for intelligent deposit machines (IDMs) — but rejected AUSTRAC's statement that it amounted to 14 separate contraventions.
Raises odds of case going to court
Financial crime analyst Nathan Lynch said CBA's statement signalled a departure from the bank's earlier responses.
"It raises the possibility of the action now going to trial," Mr Lynch, the Asia-Pacific chief of Thomson Reuters' Financial Crime and Risk, Regulatory Unit, said.
However, despite CBA digging in, Mr Lynch still believes the bank will settle with AUSTRAC.
"No-one has a greater interest in solving this as quickly and as cleanly as possible as CBA," he said.
"I believe both parties want to put it behind them and focus on the bigger picture of fighting serious financial crime in Australia."
Earlier this month, CBA said it had set aside $375 million for an expected penalty to alleged contraventions of the AML/CTF laws.
Mr Lynch noted that if the penalty followed the precedent in the Tabcorp case — where the $45 million settlement equated to about a quarter of annual operating profits — CBA faced a $2.5 billion penalty.
"The provisions from CBA suggests there's a significant gulf now between the expectations of the bank and the regulator about any agreed settlement. At the same time, this is a pretty common strategy in regulatory enforcement negotiations, which tend to go down to the wire," he said.
All class action allegations rejected
The bank also rejected all the allegations made in an investor class action launched by legal firm Maurice Blackburn.
"In our defence of the class action matter, we categorically deny all allegations of liability," the bank said.
"We consider that we have complied with our continuous disclosure obligations at all times.
"There was no price sensitive information about the matters raised in the AUSTRAC proceeding that required disclosure."
Topics: company-news, banking, law-crime-and-justice, australia
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