CBA denies new AUSTRAC allegations

In a document lodged with the Federal Court on Friday, the Commonwealth Bank of Australia (CBA) denied most of the 100 charges in the Australian Transaction Reports and Analysis Centre’s (AUSTRAC) amended statement of claim filed in December 2017.

CBA denied in full 89 of the 100 new allegations relating to breaches of the anti-money laundering/counter-terrorism funding regime, and it admitted 11 allegations in part.

Responding to the AUSTRAC allegations, CBA agreed that it was late in filing 53,506 threshold transaction reports.

However, the bank said that it would ask the court to treat all 53,506 contraventions as a “single course of conduct”. This is somewhat unsurprising, given that if the bank were to be charged the maximum penalty for each of the 53,800 breaches, it could be fined more than $1.1 trillion.

CBA also admitted that it did “not adequately adhere to risk assessment requirements” for its intelligent deposit machines, which were used by criminals to launder cash overseas. However, it said that it “did not accept that this amounted to 14 separate contraventions”.

“We agree that our transaction monitoring did not operate as intended in respect of a number of accounts between October 2012 and October 2015,” the bank said.

When it comes to CBA’s suspicious matter report (SMR) obligations, relating to which AUSTRAC is alleging 230 contraventions, the bank admitted to making errors in 98 instances.

CBA said that there were fewer than 98 separate contraventions, admitting that 53 SMRs were filed late and a further 45 SMRs “should have been filed”.

The bank is denying the remaining 132 allegations concerning SMRs.

CBA also admitted to 56 contraventions of AUSTRAC’s ongoing customer due diligence requirements.

In its response filed to the Federal Court, CBA blamed an “error in the process of merging data from two systems” for the breakdown in “account level automated transaction monitoring”, which meant that the system “did not operate as intended in respect of 778,370 accounts”.

Class action

In addition, CBA told the Federal Court that it “categorically denies” all allegations of liability relating to a shareholder class action alleging that CBA failed to disclose it was subject to potential AUSTRAC enforcement action.

The class action, launched by law firm Maurice Blackburn and litigation funder IMF Bentham, argues that the bank engaged in “misleading or deceptive conduct and/or breaching continuous disclosure obligations in relation to its non-compliance with the AML/CTF Act”, which IMF Bentham said is “information that a reasonable person would expect to have a material effect on the price or value of CBA shares”.

CBA stated on Friday: “We consider that we have complied with our continuous disclosure obligations at all times. There was no price-sensitive information about the matters raised in the AUSTRAC proceeding that required disclosure.”

The big four bank therefore rejected the allegations completely.

“CBA first became aware of AUSTRAC’s proceeding on the day it filed its statement of claim with the Federal Court on 3 August 2017,” the statement said.

“At no time prior to 3 August 2017 did AUSTRAC tell us that it had decided to take any action against CBA, or about the number or nature of the contraventions it would be alleging against CBA.

“CBA takes its continuous disclosure obligations seriously and will continue to vigorously defend the claim.”

[Related: APRA to conduct inquiry into CBA]