CBA could face $966bn in penalties

At a Senate legal and constitutional affairs committee hearing on Friday (18 August), the acting CEO of the Australian Transaction Reports and Analysis Centre (AUSTRAC), Peter Clark, was asked several questions relating to its civil penalty proceedings in the Federal Court against Commonwealth Bank (CBA) for “serious and systemic non-compliance” with anti-money laundering and counter-terrorism laws.

AUSTRAC has claimed that CBA breached the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act), particularly regarding its use of intelligent deposit machines (IDMs).

AUSTRAC’s action, which was detailed in a 580-page statement of claim, alleges over 53,700 contraventions of the AML/CTF Act.

The damning claim alleges that:

• nearly $9 billion of cash was deposited through the bank’s IDMs before it conducted an assessment of the money laundering/terrorism funding risks associated with the machinery (nearly three years after they were first introduced);
• the bank failed to give 53,506 “threshold transaction” reports (TTRs) to AUSTRAC on time for cash transactions of $10,000 or more through IDMs (totalling $624.7 million) from November 2012 to September 2015;
• the bank failed to report suspicious matters either on time or at all involving transactions totalling over $77 million; and that
• even after CBA became aware of suspected money laundering or structuring on CBA accounts, it did not monitor its customers to mitigate and manage ML/TF risk, including the ongoing ML/TF risks of doing business with those customers. 

Fine could equate to around 100 years' worth of profit

When asked how much the bank could be liable to pay if found guilty of breaking the law, Mr Clark emphasised that the penalty amount is a matter for the federal court.

He said: “These are contraventions of our act, they are civil penalty contraventions and they relate to a range of non-reporting, particularly around the threshold transaction reports coming through, what I describe as intelligent deposit machines, which is an important element in this matter.

“I cannot comment on the penalty other than to say that is obviously a matter for the federal court. What I can say that the federal court will take into account a range of issues when considering the penalty and that will obviously go to the size of the number of contraventions, the totality of the alleged behaviour, etc.”

However, Mr Clark did confirm that there is a maximum penalty of $18 million per contravention.

As such, that would suggest that the bank could be liable to a penalty of $966 billion if fined the maximum amount for the 53,700 transactions that it allegedly failed to report. This equates to nearly 100 years' worth of profit (based on the profit announcement for the last financial year).

This is contrary to some claims from the bank that they would only be subject to one $18 million penalty if found guilty.

However, it is ultimately up to the federal court to decide the penalty.

Notably, the acting CEO also revealed that six of the cash transactions that were not properly reported could have terrorism links.

When asked why AUSTRAC went down civil, rather than criminal, prosecution, Mr Clark said: “The evidence that we have gathered as a part of this matter supports taking civil penalty action. Our act is primarily a civil penalty regime. We do have some criminal provisions, but they don’t apply to the particular events in this matter. So it’s up to other law enforcement agencies to look into those. But as matters are, we felt that this matter [should] most probably be dealt with through civil proceedings.”

Asked whether there were similar suspected contraventions at the other big four banks, Mr Clark commented: “We undertook an examination of the other major banks in terms of their intelligent deposit machines. We were satisfied that they had thresholds less than the reporting threshold for their transactions and had in place mechanisms to monitor and report them.”

He concluded: “This is the first action of this nature that we have taken.”

[Related: ASIC investigating money laundering claims]