Commonwealth Bank to pay $700m in settlement with Austrac over anti-money laundering claims

Commonwealth Bank has agreed to a $700 million settlement with the anti-money laundering regulator — almost double its previous estimates — as it admits to breaching regulations more than 50,000 times.

CBA will pay a $700m civil penalty plus the regulator Austrac’s costs of $2.5m, as it admits to breaching anti-money laundering and counter-terrorism financing legislation, including failing to properly carry out risk procedures and customer monitoring. Some of Austrac’s allegations were dismissed as part of the mediated deal.

If agreed to by the Federal Court, this will represent the largest ever civil penalty in Australian corporate history.

CBA (CBA) had put aside $375 million in a provision for possible penalties stemming from Austrac’s allegations, which were launched in the Federal Court last August.

CBA’s intelligent deposit machines, which were rolled out in 2012, failed to automatically send the regulator information about potential washing of money through its smart ATMs by criminal syndicates and terrorist financiers.

The bank’s provision of $375 million for a civil penalty, set out in its interim result on February 7, was described as a reliable estimate of the expected penalty, taking into account legal advice obtained by the bank in relation to Austrac’s claims.

CBA chief executive Matt Comyn said the agreement still needed to be approved by the Federal Court.

“While not deliberate, we fully appreciate the seriousness of the mistakes we made. Our agreement today is a clear acknowledgment of our failures and is an important step towards moving the bank forward,” Mr Comyn said. “On behalf of Commonwealth Bank, I apologise to the community for letting them down.

“In reaching this position, we have also agreed with Austrac that we will work closely together based on an open and constructive approach.”

The Federal Court could still decide to impose a higher or lower fine on the bank, and CBA said it would book the $700m provision in its accounts to be unveiled in August.

As part of the settlement, CBA agreed it had filed late 53,506 transaction reports for cash deposits through its intelligent deposit machines. The bank also had inadequate risk assessment requirements for the ATMs on 14 occasions. The lender further failed to properly monitor its customers, with the late filing of 149 suspicious matters and sloppy customer due diligence in 80 instances.

“We are committed to build on the significant changes made in recent years as part of a comprehensive program to improve operational risk management and compliance at the bank,” Mr Comyn said.

The bank has spent more than $400m overhauling its compliance systems.

“We have changed senior leadership in the key roles overseeing financial crimes compliance supported by significant resources and clear accountabilities,” Mr Comyn said.

“We have started implementing our response to the recommendations provided to us by our prudential regulator, APRA, to ensure our governance, culture and accountability frameworks and practices meet the high standards expected of us.

“Today is another very important step forward, and continuing to make the changes we need in an open, transparent and timely way is my absolute priority as CBA’s new chief executive,” Mr Comyn said.

CBA previously said it would defend itself against the “majority” of the expanded claims brought against it and has “categorically” denied liability in a separate class action.

Austrac chief executive Nicole Rose said in April she was open to a settlement with CBA over the alleged breaches.