CBA was forced to give Austrac minutes before court case

The Australian 12:00am April 23, 2018

Michael Roddan

Commonwealth Bank was forced to hand the financial intelligence regulator board meeting minutes wherever a review of its compliance with anti-money-laundering laws had been discussed more than a year before Austrac sued the lender in the Federal Court.

Documents obtained by The Australian under Freedom of Information laws reveal the money-laundering watchdog had serious concerns with CBA’s compliance and audit of its anti-money-laundering policy well before Austrac filed its explosive legal suit against the lender in August last year.

According to documents dated June 2016, CBA was forced to hand over to Austrac all of the bank’s “internal and external audit reports” relating to its compliance with anti-money-laundering and counter-terrorism-financing laws between 2011 and 2016.

Also requested were “all minutes of meetings” of the CBA board, its audit committee and its risk committee at which any audit report concerning its money-laundering compliance was considered.

Austrac filed a 600-page legal suit in the Federal Court in early August accusing CBA of breaching anti-money-laundering and counter-terrorism-financing laws by failing to properly monitor tens of thousands of transactions through its smart ATM network.

The intelligent deposit machines were rolled out in 2012 without proper coding that would automatically send legally required reports for cash transactions of more than $10,000 to the regulator.

In mid-2015, Austrac asked CBA for a number of apparently missing transaction reports, which led the bank to discover it had failed to send the reports.

The bank has denied it had any knowledge of the charges levelled against it until the statement of claim was filed in court and subsequently became public.

Following the Austrac suit, CBA shares fell 13 per cent in just over a month.

A class action has been launched by Maurice Blackburn that has the potential to be the largest suit of its kind in Australian history. CBA has said it will vigorously defend the suit.

A subsequent class action, by law firm Phi Finney McDonald, has also been announced, purportedly with the backing of heavyweight US public pension funds with a combined net worth of nearly $US500 billion ($651bn).

The regulator also attached a list of accounts to its request for information, asking the bank about its compliance with customer-identification and due-diligence rules. Austrac also asked the bank whether any “transaction monitoring alert was raised” in regards to the account “and if so, what triggered each alert”.

According to the newly obtained documents, CBA was also forced to give the regulator “all versions” of its anti-money-laundering policy from January 2011 onwards.

Also requested were “documents recording the assessment of the money laundering and financing of terrorism risks posed by the delivery of designated services through intelligent deposit machines prior to CommBank adopting this method of service delivery/new technology”, along with documents “recording the systems, controls or procedures” to manage those risks.

All emails between CBA heads of intelligence and planning, group security, anti-money-laundering and sanctions, counter-terrorism-financing operations and compliance services discussing suspicious accounts were also requested. Under a section labelled “late threshold transaction reports”, Austrac asked CBA for a “full description of the errors that resulted in the failure” to give more than 2000 reports to the regulator “within the period specified” by the law.

CBA was also asked the total value of cash deposited through its smart ATM network “each month” for the years 2012 through 2016.

Austrac in mid-October 2016 and early March 2017 had given CBA notices that required the bank to hand over more detailed information relating to the bank’s compliance systems and processes after its responses to the first request raised more issues.

New Austrac chief executive Nicole Rose earlier this month said the regulator was open to a settlement with CBA over the claims.

The Federal Court has ordered CBA and Austrac to mediation to try to settle money-laundering allegations before May 25.