The Commonwealth Bank is potentially facing millions of dollars in civil penalties following allegations it did not comply with anti-money laundering and counter-terrorism law.
Financial intelligence and regulatory agency AUSTRAC has initiated Federal Court proceedings against the bank, alleging that CBA contravened the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 more than 53,000 times.
The allegations include that CBA was late to report their intelligent deposit machines (IDMs) were potentially being used by multiple suspected money laundering syndicates, linked to criminal activity including drug importation, to deposit cash before immediately transferring the funds offshore.
AUSTRAC alleges that CBA ignored legal requirements to assess the risk of money laundering and terrorism financing through intelligent deposit machines (IDMs) before their rollout , and failed to report more than 53,000 cash transactions of $10,000 or more made through the IDMs between 2012 and 2015 to the agency totaling about $625 million. More than $77 million were deemed by AUSTRAC to be "suspicious", and more than $17 million were deemed to be related to transactions connected with money laundering syndicates under investigation by the Australian Federal Police.
IDMs can accept up to 200 notes per deposit, or up to $20,000 per cash transaction. CBA does not limit the number of IDM transactions a customer can make per day. According to AUSTRAC, in the six months between January 2016 and June 2016, cash deposits through this channel grew to $5.81 billion.
Under the Anti-Money Laundering and Counter-Terrorism Financing Act (AML/CTF), deposit taking institutions are required to report significant cash transactions of $10,000 or more to AUSTRAC. As at April 2016, the maximum civil penalty a court may order for an individual contravention is $18 million.
Earlier this year, the Federal Court fined gambling and entertainment company Tabcorp $45 million for 108 breaches of the act, the highest civil penalty in Australian corporate history at the time.
In a statement, AUSTRAC said the effect of CommBank's conduct in this matter has exposed the Australian community to serious and ongoing financial crime.
Acting chief executive Peter Clark went onto say that the agencies actions should send a clear message to all reporting entities about the importance of meeting their legislative obligations.
"By failing to have sound AML/CTF systems and controls in place, businesses are at risk of being misused for criminal purposes," Clark said.
"AUSTRAC's goal is to have a financial sector that is vigilant and capable of responding, including through innovation, to threats of criminal exploitation."
In one account, AUSTRAC alleges that between late 2014 to August 2015, about $20.59 million was deposited through IDMs into 30 CommBank accounts, 29 of which were in fake names. Shortly after each deposit, they money was transferred internationally. By April 2015, CBA had allegedly identified the suspicious pattern, but permitted approximately $9.1 million to be transferred from these accounts to Hong Kong.
Four other accounts were filled with the Federal Court, detailing similar activity.
The Finance Sector Union of Australia has used the opportunity to call on Prime Minister Turnbull to initiate a banking Royal Commission, noting: "The latest allegations made against the CBA should be more than enough to finally convince Prime Minister Malcolm Turnbull there is an urgent need to clean up Australian's banking system."
"When the largest and most profitable bank in Australia is facing serious allegations of money laundering, it's time for the government to step in and clean up the entire banking system, once and for all," FSU national secretary Julia Angrisano said.
The Commonwealth bank issued a statement yesterday saying that they would "never deliberately" undertake actions that enables any form of crime, and emphasised their commitment to reporting and working with AUSTRAC.
"We are currently reviewing AUSTRAC's claim and will file a statement of defence in this matter," the bank went onto say.
A short time ago, CBA shares were down 2.39% to $81.94.