Federal Court rejects two CBA class actions

The Federal Court shut down two class actions against Commonwealth Bank of Australia (CBA) relating to anti-money laundering and counter-terrorism financing (AML/CTF).

AUSTRAC alleged as early as 2017 that the bank contravened the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 more than 53,000 times.

Allegations included CBA being late to report its intelligent deposit machines (IDMs) were potentially being used by multiple suspected money laundering syndicates linked to criminal activity that include drug importation.

Even after CBA became aware of suspected terrorism financing, money laundering and/or structuring on CBA accounts in 38 instances, AUSTRAC at the time accused CBA did not appropriately monitor its customers to mitigate and manage money laundering and terrorism financing risk, including the ongoing AML/CTF risks of doing business with those customers.

The Zonia class action began on 9 October 2017, whilst the Baron class action started on 2 July 2018.

ASX-listed Omni Bridgeway (formerly IMF Bentham) funded the 2017 shareholder class action against CBA together with Maurice Balckburn Lawyers.

Justice David Yates said in his decision on May 10 that the applicants could not establish the bank contravened s 674(2) of the Corporations Act, which forces listed entities to commit to continuous disclosure requirements, with respect to knowing about the AML/CTF contraventions and sharing this with the market.

The applicants argued that the information CBA should have released included the late Threshold Transaction Reports (TTR), account monitoring failure, IDM ML/TF risk assessment non-compliance, and potential penalties.

"The applicants allege that the Bank was required by r 3.1 of the ASX Listing Rules to disclose this information. They allege, further, that, had this information (or a combination of it) been disclosed, it would have had a material effect on the market price of CBA shares," Justice Yates said.

Overall, Justice Yates was not satisfied that if the information was disclosed "at the relevantly pleaded times, would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of CBA shares."

"More generally, I am not satisfied that the information, in any of its pleaded forms, was information that a reasonable person would expect to have a material effect on the price or value of CBA shares if that information were to have been generally available at the relevantly pleaded times," he said.

In response to the judgment, CBA said it denied all the allegations and that "the parties are to consider consequential orders to give effect to the judgment."

"The applicant's legal team is reviewing the judgment and assessing the prospects of an appeal. Notice of any appeal will need to be given within 28 days of the court making final orders. The judgment is subject to a non-publication order until 15 May 2024 and prior to that Omni Bridgeway will not have access to it," Omni Bridgeway said.

To fund the class action, Omni Bridgeway at the time entered into two arrangements: Fund 2 comprising $90 million managed by Partners Capital and $22.5 million invested by IMF, while Fund 3 had $30 million managed by Amitell Capital and $7.5 million invested by IMF for ongoing funding.