Commonwealth Bank chairwoman Catherine Livingstone came under intense questioning about the bank’s money laundering scandal when she appeared before a parliamentary inquiry in Canberra today.
Liberal MP David Coleman, chair of the House of Representatives Standing Committee on Economics, said the bank’s self-judged risk profile, as stated in the 2015-16 annual report, was judged to be above target for executive pay.
However, the board of directors then knew of the 53,000 instances, also called TTRs (threshold transaction reports), of authorities not being alerted to large cash deposits via the bank’s smart ATMs. This potentially exposed the bank to billions of dollars in fines for breaches of anti-money laundering regulations.
The Commonwealth Bank of Australia is in the Federal Court, accused of breaching the Anti-Money Laundering and Counter-Terrorism Financing Act over combined cash deposits of $624.7 million via smart ATMs.
Coleman: “Surely it must be the case that the board has manifestly failed its duty with respect to the remuneration report.”
Livingstone: “What the board knew was that there were 53,000 TTRs that had not been submitted to AUSTRAC (Australia’s financial intelligence and regulatory agency).”
She outlined the decision in the 2017 annual report to cut executive short term bonuses to zero and to shave board director fees by 20%.
Coleman kept asking the question about the bank’s potential exposure to billion of dollars in fines and pointing to the fact that this was not mentioned as a risk in the annual report.
Coleman: “So you stand by the remuneration report in 2015-16?”
“At that time.”
Livingstone said the bank didn’t know that AUSTRAC had decided to launch proceedings until the day it did in August this year.
“We do have rigorous procedures and processes around disclosure,” she said.
Coleman: “Should shareholders have confidence in your capacity and judgement as directors based on what you did in 2015-16?”
Livingstone: “On the basis of the facts that we took into account at that time we believe we made the right determination.”
She said a board of directors has to operate on the basis of the knowledge it has at any given time.
Livingstone: “It was important, we felt, to take action immediately in relation to executive remuneration.”
Coleman: “When you say immediately you mean two years after you became aware of it?”
Livingstone: “No, we took action immediately, as soon as we became aware … and as I said we did not know that AUSTRAC was going to file civil proceedings … as soon as we became aware we took action.”
Coleman: “Yes, but you’re making this very bright line distinction between before and after AUSTRAC made this pubic. The actual underlying facts haven’t changed. The board has been aware of many of these facts for years and you are basically saying that you were required to action after AUSTRAC made public but before then you weren’t. I am not sure that is a credible position for the board to take. “
Livingstone: “There were a great deal of detail in the AUSTRAC allegations of which we were not fully aware … that’s why we have to work through that material and track down the root cause in the bank.”
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