EY to comb CBA books as Austrac laundering probe looms

The Australian 12:00am September 12, 2017

Bridget Carter, Scott Murdoch

The Commonwealth Bank has called in to carry out a forensic audit on behalf of its board of directors charged with overseeing the bank’s response to the ongoing money laundering crisis.

The directors have also commissioned Ashurst to advise them on the legal matters arising from the Austrac investigation, especially in terms of their potential personal liability.

A class action being mounted by Maurice Blackburn is touted as potentially the largest case of its kind in Australia. The case was given further impetus last week when litigation funder IMF Bentham said it was preparing to put cash behind the claims.

Solicitors are urging investors who bought shares between August 2015 and this year to come forward because the bank allegedly breached its continuous disclosure obligations.

Class actions usually target the company but there are concerns that allegations could be raised that the directors had breached their duties.

A board subcommittee made up of Mary Padbury, Catherine Livingstone, Brian Long and Shirish Apte, who also chairs the board’s risk committee, meets weekly. It’s expected to recommend job cuts but those have yet to be announced.

CBA has called on Ernst & Young’s services before and the firm was appointed to carry out a review of the CommInsure scandal alongside law firm DLA Piper.

Herbert Smith Freehills, CBA’s retained counsel, is helping the bank compile its defence on the Austrac statement of claim, which outlines the money laundering allegations.

Lawyers and CBA are no strangers to each other right now as the bank prepares for a European debt raising as well as selling the trouble-prone CommInsure business.

Insurer AIA has reportedly brought on Ashurst to advise it on buying CommInsure and the firm is hammering home the issue of warranties. The buyer of CommInsure will insist it does not inherit any problems.

CBA also has lawyers clambering over its upcoming European debt deal, which could be launched later this week.

The bank traditionally raises capital straight after its results but has waited for more than a month for the Austrac scandal to calm. Most onlookers believe CBA won’t have a problem raising debt because it’s considered one of the top-performing and most stable banks in the world, but the cash could come at a higher cost.

DataRoom understands most of the local investment banks have been drafted into help underwrite the deal and given the nature of the Austrac claims the transaction is especially sensitive.