The Commonwealth Bank announced this morning that it has entered into an agreement with the Australian financial intelligence agency, AUSTRAC.
The bank agreed to pay a $700 million civil penalty and AUSTRAC’s $2.5 million legal fees and has admitted to 53,750 contraventions of the Anti-Money Laundering/Counter-Terrorism Financing (AML/CTF) Act.
The decision remains subject to court approval, but the proceedings against the bank are otherwise dismissed.
The penalty is the largest in Australian corporate history and, according to CBA CEO Matt Comyn, reflects the “seriousness of the mistakes we made”.
Speaking this morning, he said, “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.
“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. On behalf of Commonwealth Bank, I apologise to the community for letting them down.
“Banks have a critical role to play in combating financial crime and protecting the integrity of the financial system. In reaching this position, we have also agreed with AUSTRAC that we will work closely together based on an open and constructive approach.”
The bank provided for a $375 million estimated penalty in December last year but said it will recognise the $700 million penalty – nearly double the estimated sum – in its financial statements for the year ending 30 June 2018.
However, if the bank was fined the maximum amount for each alleged breach, the penalty would have been closer to $966 billion.
AUSTRAC CEO Nicole Rose said the outcome should send a message that non-compliance with AML/CTF obligations will not be tolerated, noting that criminals will take advantage of lax security and compliance to launder proceeds.
“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,” she said.
“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 AML/CTF compliance and risk management to be embedded in business strategy and practices.”
What brought them to this?
AUSTRAC accused CBA of AML/CTF failures in August last year after it failed to report a number of suspicious transactions. According to AUSTRAC at the time, CBA also failed to monitor its customers to manage the risk
In the months that followed, CBA was hit with a class action prepared by Maurice Blackburn Lawyers, further allegations of money laundering breaches and the departure of a number of key staff, including former CEO Ian Narev.