CBA settles with AUSTRAC for $700m

Commonwealth Bank will pay $700 million to resolve civil proceedings brought against it by AUSTRAC for contravening anti-money laundering and counter-terrorism laws - almost double what it anticipated.

CBA has announced it reached an agreement with AUSTRAC that will see the bank pay a civil penalty of $700 million as well as cover AUSTRAC's legal fees which amount to $2.5 million. If the penalty is agreed to by the Federal Court, it will represent "the largest ever penalty in Australian corporate history", according to AUSTRAC.

In its financials for the half year ending 31 December 2017, CBA provided for an estimated penalty of $375 million.

The bank has also admitted to further contraventions of the Anti-Money Laundering and Counter-Terrorism Act, in addition to those already acknowledged. These include contraventions in risk procedures, reporting, monitoring and customer due diligence.

Under the agreement, a statement of agreed facts was devised. In that document CBA admitted to the late filing of 53,506 threshold transaction reports for cash deposits through intelligent deposit machines (IDMs); inadequate adherence to risk assessment requirements for IDMs on 14 occasions; and that transaction monitoring did not operate as intended in respect of a number of accounts between October 2012 and October 2015.

It also acknowledged the late filing of or failure to file 149 suspicious matter reports, and that ongoing customer due diligence requirements were breached in respect of 80 customers.

AUSTRAC chief executive Nicole Rose said: "As we have seen in this case, criminals will exploit poor business practices to launder the proceeds of their crimes."

"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."

Though the agreement is still subject to Federal Court approval, the civil proceedings have otherwise come to an end - AUSTRAC and CBA will jointly approach the court seeking orders to this effect and a hearing on the penalty is expected to take place in the coming months.

The agreement brings certainty to one of the most significant issues CBA has faced, the bank's chief executive Matt Comyn said.

He said while the contraventions were not deliberate, the bank fully appreciates the severity of its mistakes.

"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," Comyn said.

"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."

Comyn said CBA is committed to building on the significant changes it has made in recent years as part of a comprehensive program to improve operational risk management and compliance.

To date, CBA has spent more than $400 million on systems, processes and people relating to AML/CTF compliance and will continue to prioritise investment in this area, he said.

He confirmed the bank has restructured senior leadership in key roles overseeing financial crimes compliance, providing significant increased resources and clarity as to accountabilities.

"We have started implementing our response to the recommendations provided to us by our prudential regulator, APRA, to ensure our governance, culture and accountability frameworks and practices meet the high standards expected of us," Comyn added.

CBA said it will recognise a $700 million provision in its financial statements for the full year ending 30 June 2018 which will be announced on August 8.

"I hope this result alerts the financial sector to the consequences of poor compliance, and reinforces that businesses need to take their obligations seriously," Rose added.

Read more: AUSTRACCBACommonwealth BankAPRACounter-Terrorism ActMatt Comyn
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