CBA chair Catherine Livingstone is next to criticise the bank’s old management regime

Catherine Livingstone at the royal commission. Screenshot from webcast.
  • Commonwealth chair Catherine Livingstone has revealed how she became increasingly concerned about the bank’s management.
  • At a board meeting in late 2016, she challenged management about how they were dealing with breaches of money laundering regulations.
  • She says the response confirmed her view that management didn’t have the capacity to respond to such a serious issue.

Commonwealth chair Catherine Livingstone says was concerned about the capability of the bank’s management to deal with money-laundering problems when she became head of the board of directors in January 2017.

She was speaking at the financial services royal commission hearing where she was being questioned by Rowena Orr, senior counsel assisting the royal commission.

Livingstone gave evidence about her increasing concerns, before she became chair, on the ability of management to deal with escalating problems including notices from AUSTRAC, the Australian Government’s financial intelligence agency, about massive money laundering regulation breaches.

She also revealed how and why she became chair of the board of directors.

“What I did, from 1 January 2017, is put my reputation on the line, take up the role of chair of CBA, and its responsibilities, but, more importantly, its accountability for leading the fundamental change that had to be made in the way CBA operates,” Livingstone, a former chair of Telstra, told the hearing.

She was questioned about board minutes in October, November and December 2016.

Livingstone says it was at the October board meeting, when she was a director, that she challenged management in relation to the reports of breaches of anti-money laundering rules.

“I did not receive satisfactory answer to my challenge, because it did not accord with my understanding of AUSTRAC,” she told the hearing.

“That response served to confirm the concern that I had been developing, based on my experience as a non-executive director, that management, at that time, did not have the capacity to respond to what was, clearly, an escalating, significant and serious systemic control challenge.

“Later, at that same meeting, and following what was the surprise and sudden decision of the former chairman (David Turner), that he wanted to resign from 31 December that year, I agreed to take on the role of chair of CBA.

“In making that decision, I understood very clearly that the degree of diligence that would be required from me would be greater than anything I had undertaken to date in my career, and that it would take years.

“What was clear to me was that neither management nor internal audit could articulate the problem they were trying to solve, let alone identify the root cause of that problem.

“And, unfortunately, that judgment was borne out by subsequent events.”

Orr: “So you had a significant lack of faith not only in management but in the audit team as well. You weren’t interested in the detail of their audit report about the failings?”

Livingstone: “I did not say that I was not interested. I said .. neither the auditor nor management could articulate what the problem was and hence what the root cause was. They could identify the symptoms.”

The bank in June this year agreed to pay $700 million, the largest civil penalty in Australian corporate history, and $2.5 million in AUSTRAC’s legal costs, to settle the money laundering and counter terrorism financing case.

Yesterday, the current CEO of the Commonwealth, Matt Comyn, told the commission of a meeting he had with his predecessor Ian Narev three years ago.

Comyn’s proposal to stop selling junk credit card insurance was rejected by Narev, according to notes Comyn took at the time.

Narev, according to Comyn’s notes, told him to: “Temper your sense of justice”.

Comyn told the hearing he took that to mean he should calm down.