AUSTRAC will up the ante in its case against the Commonwealth Bank of Australia, with the transactions regulator expecting to file fresh allegations on Thursday that it breached the law 100 additional times while facilitating banking by criminal syndicates involved in money laundering and terrorist financing.
Commonwealth Bank filed its defence to AUSTRAC’s original allegations on Wednesday, admitting it was late filing 53,506 threshold transaction reports “which all resulted from the same systems related error”. It also admitted it “did not adequately adhere to risk assessment requirements for intelligent deposit machines” although it disputes the number of contraventions.
CBA admits that it did not undertake a separate money laundering and terrorism financing risk assessment on its intelligent deposit machines prior to their roll-out in May 2012. Assessment of the risks conducted by the bank in July 2015, July 2016 and October 2017 found the inherent risk borne by the machines was “high”.
The bank acknowledges it should have introduced daily limits on cash deposits in light of information by January 2016 to mitigate the risks. The bank did not introduce daily deposit limits until November 2017. The bank says due to an error in the process of merging systems automated monitoring failed to operate as intended across 778,370 accounts.
CBA also said it will admit in whole or part 91 of the allegations failures to supply “suspicious matter reports” but will deny a further 83 of AUSTRAC’s allegations, and admit in whole or part 52 of the allegations concerning ongoing requirements to conduct customer due diligence but deny a further 19 of them.
CBA said that AUSTRAC has indicated that it proposes to file an amended statement of claim in the Federal Court containing additional alleged contraventions. The bank was required to report transactions involving amounts over $10,000 as well as suspicious activities.
“If an amended claim is served on us, we expect the court would set a timetable for CBA to file an amended defence. We will provide market updates as appropriate,” the bank said.
The bank says it takes its obligations seriously and accepts the importance of the legislation. It says it “accepts that the failure to issue TTRs and SMRs in accordance with the act has deprived law enforcement of some additional intelligence”.
It is understood that AUSTRAC’s amended claim relates to additional contraventions that came to light after the original statement of claim was lodged with the Federal Court in August.
The expected 100 additional allegations may include new information that CBA breached its anti-money laundering and counter terrorism financing obligations relating to individuals with connections to known terrorist organisations, and will allege new connections with criminal syndicates laundering money out of Australia.
There may also be additional allegations relating to failure to report suspicious matters within required timeframe, and breaches of customer due diligence relating to customer identity.
“We deeply regret any failure to comply with these obligations,” CBA said in a statement. “CBA is accountable for those deficiencies.”
CBA has pointed to a “program of action” which it says has addressed issues that AUSTRAC alleges were ongoing contraventions in its claim. It says it has closed 4000 accounts between July 1, 2012 and July 31, 2017.
The initial revelation of the alleged breaches by AUSTRAC in August triggered dramatic actions by the CBA board and other regulators. New chair Catherine Livingstone slashed the senior executive team’s short-term bonuses to zero and pulled forward an announcement that chief executive Ian Narev would retire by mid next year once a successor is found.
The claims also prompted the Australian Prudential Regulation Authority to launch a review into the bank’s risk culture, which will report next year. CBA is also facing a shareholder class action and, potentially, a case by the corporate regulator relating to continuous disclosure.