The Commonwealth Bank has agreed to pay $700m to settle civil proceedings relating to breaches of anti-money laundering and counter-terrorism financing laws.
If the federal court accepts the offer it will be the largest civil penalty in Australia’s corporate history.
The announcement follows court-ordered mediation between CBA and the government’s financial intelligence agency, Austrac. The deal would close civil proceedings against CBA, which began 10 months ago.
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In August Austrac announced it was suing CBA for 53,700 alleged breaches of money laundering and counter-terrorism financing laws. The case related to CBA’s use of intelligent deposit machines, a type of ATM launched in 2012, which let customers anonymously deposit and transfer cash.
The investigation, undertaken in partnership with federal police, NSW police and Western Australia police, found that the machines were being used to launder the illicit proceeds of crime.
CBA has agreed to pay a civil penalty of $700m and Austrac’s legal costs of $2.5m to end the matter. It had originally provided for an estimated penalty of $375m.
The bank’s share price jumped from $68.70 to $70.23 - or 2.2% - after the announcement, a sign shareholders were relieved about the size of the penalty. By midday the share price had settled near $69.70.
“This agreement, while it still needs to be approved by the federal court, brings certainty to one of the most significant issues we have faced,” CBA’s chief executive, Matt Comyn, said on Monday.
“While 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.”
In reaching the agreement with Austrac, CBA has admitted it contravened the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 on 53,750 occasions.
It has also accepted that:
- It failed to carry out an appropriate assessment of the money laundering and terrorism financing risks of its intelligent deposit machines before October 2017.
- It failed to complete the introduction of appropriate controls to mitigate and manage the risks before April 2018.
- It failed to provide 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, having a total value of about $625m.
- For three years it did not comply with the requirements of its anti-money laundering and counter-terrorism financing program relating to monitoring transactions on 778,370 accounts.
- It failed to report suspicious matters on time, or at all, involving transactions in the tens of millions of dollars.
- Even after it became aware of suspected money laundering or structuring on CBA accounts, it did not monitor its customers to mitigate and manage money laundering and terrorism financing risks, including the ongoing risks of doing business with those customers.
Austrac’s chief executive, Nicole Rose, said the agreement sent a strong message to the financial industry.
“As we have seen in this case, criminals will exploit poor business practices to launder the proceeds of their crimes,” Rose said. “This has real impacts on the everyday lives of Australians and puts the community at risk by increasing opportunities for terrorists to support attacks here and overseas, and enabling organised crime groups to peddle drugs to our families and friends.
“We know that businesses are the first line of defence in protecting the community and our financial system from criminal abuse, and it is critical for [money laundering and counter-terrorism financing] compliance and risk management to be embedded in business strategy and practices.”
Comyn apologised to Australians for letting them down. “We have changed senior leadership in the key roles overseeing financial crimes compliance supported by significant resources and clear accountabilities,” he said.
The attorney general, Christian Porter, said: “I congratulate Austrac, its CEO and legal team for their engagement with me which has enabled this matter to be resolved in such a successful and speedy way.”
The home affairs minister, Peter Dutton, said CBA’s disregard of its anti-money laundering and counter-terrorism obligations had allowed criminals to exploit its systems and put the Australian community at risk.
“This very large number of breaches over several years is unacceptable and should never have been allowed to happen,” Dutton said.
The treasurer, Scott Morrison, said the law was non-negotiable, especially when it came to the country’s largest financial institutions.
“The government is serious about enforcing any breaches,” he said. “Banks should be leaders in ensuring their systems cannot be compromised by criminals seeking to launder money or finance terrorist activities.”
Labor’s opposition assistant treasurer, Andrew Leigh, said the size of the payout reflected the gravity of CBA’s wrongdoing.
“Again it reinforces the call we have been making for the last two years for a royal commission,” he told Sky News. “We have seen from CBA alone, scandals ranging from children’s bank accounts to charging dead people for work that hadn’t been done.”
