The nation’s largest lender has been sued by the government’s financial crime agency over 53,700 alleged breaches of money laundering and terrorism financing laws
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(Bloomberg) -- Commonwealth Bank of Australia, the nation’s largest lender, has been sued by the government’s financial crime agency over 53,700 alleged breaches of money laundering and terrorism financing laws.
The civil case relates to Commonwealth Bank’s automated cash deposit machines, which allow anonymous deposits to recipient accounts that can then be funneled offshore or to other domestic accounts, Austrac said in documents lodged with the Federal Court in Sydney on Thursday. The cash deposit machines were used by drug rings to move the proceeds of crime, the agency said.
The bank’s “conduct in this matter has exposed the Australian community to serious and ongoing financial crime,” Austrac said in the court filing. “Delays in this case have resulted in lost intelligence and evidence, including CCTV footage, further money laundering and lost proceeds of crime.”
Commonwealth Bank said it has been in discussions with Austrac and “cooperated fully with their requests.” The bank is reviewing the nature of the proceedings and will have more to say on the specific claims in “due course,” it said in an emailed statement.
The case is the latest crisis to engulf the Commonwealth Bank, and the broader banking industry, from giving poor advice to wealth-management customers to being charged with manipulating the nation’s benchmark swap rate. The government has capitalized on public anger with the banks to slap them with a A$6.2 billion ($4.9 billion) tax to help plug the budget deficit, while the opposition Labor party is calling for a wide-ranging Royal Commission into the financial industry.
Record Penalty
Commonwealth Bank shares erased earlier gains to close down 0.3 percent at A$83.97 in Sydney trading. The stock has risen 1.9 percent this year.
Gaming company Tabcorp Holdings Ltd. in March agreed to pay a A$45 million penalty to settle 108 breaches of the legislation, the biggest civil corporate penalty in Australia. The maximum penalty is A$18 million per breach.
The automated machines were introduced in May 2012, and the amount of cash flowing though them grew exponentially, the court documents say. In the six months to November 2012 about A$89.1 million was deposited. By May and June 2016 this had risen to more than A$1 billion per month. About A$8.9 billion in cash was put through the system before the bank conducted any assessment of the money laundering risk, Austrac said.
Austrac alleges the lender failed to report suspicious matters either on time or at all involving transactions totaling more than A$77 million. It says the lender didn’t monitor its customers to mitigate the risk even after being made aware by law enforcement agencies of suspected money laundering.
Austrac detailed five money laundering syndicates it says took advantage of the machines. In one case, more than A$21 million from illicit drug imports was deposited in cash into 11 accounts, Austrac said. The Australian Federal Police advised the bank that a number of the accounts were connected with serious criminal offences, but Commonwealth Bank permitted several accounts to remain open and make further transactions, Austrac said.
In another case, it alleges A$20.6 million was deposited into 30 accounts, 29 of which were in fake names, which shortly after was transferred abroad. After the bank identified “repeated, suspicions and connected” patterns of cash deposits, it permitted a further approximately A$9.1 million to be transferred from these accounts to Hong Kong, Austrac said.
The civil case relates to Commonwealth Bank’s automated cash deposit machines, which allow anonymous deposits to recipient accounts that can then be funneled offshore or to other domestic accounts, Austrac said in documents lodged with the Federal Court in Sydney on Thursday. The cash deposit machines were used by drug rings to move the proceeds of crime, the agency said.
The bank’s “conduct in this matter has exposed the Australian community to serious and ongoing financial crime,” Austrac said in the court filing. “Delays in this case have resulted in lost intelligence and evidence, including CCTV footage, further money laundering and lost proceeds of crime.”
Commonwealth Bank said it has been in discussions with Austrac and “cooperated fully with their requests.” The bank is reviewing the nature of the proceedings and will have more to say on the specific claims in “due course,” it said in an emailed statement.
The case is the latest crisis to engulf the Commonwealth Bank, and the broader banking industry, from giving poor advice to wealth-management customers to being charged with manipulating the nation’s benchmark swap rate. The government has capitalized on public anger with the banks to slap them with a A$6.2 billion ($4.9 billion) tax to help plug the budget deficit, while the opposition Labor party is calling for a wide-ranging Royal Commission into the financial industry.
Record Penalty
Commonwealth Bank shares erased earlier gains to close down 0.3 percent at A$83.97 in Sydney trading. The stock has risen 1.9 percent this year.
Gaming company Tabcorp Holdings Ltd. in March agreed to pay a A$45 million penalty to settle 108 breaches of the legislation, the biggest civil corporate penalty in Australia. The maximum penalty is A$18 million per breach.
The automated machines were introduced in May 2012, and the amount of cash flowing though them grew exponentially, the court documents say. In the six months to November 2012 about A$89.1 million was deposited. By May and June 2016 this had risen to more than A$1 billion per month. About A$8.9 billion in cash was put through the system before the bank conducted any assessment of the money laundering risk, Austrac said.
Austrac alleges the lender failed to report suspicious matters either on time or at all involving transactions totaling more than A$77 million. It says the lender didn’t monitor its customers to mitigate the risk even after being made aware by law enforcement agencies of suspected money laundering.
Austrac detailed five money laundering syndicates it says took advantage of the machines. In one case, more than A$21 million from illicit drug imports was deposited in cash into 11 accounts, Austrac said. The Australian Federal Police advised the bank that a number of the accounts were connected with serious criminal offences, but Commonwealth Bank permitted several accounts to remain open and make further transactions, Austrac said.
In another case, it alleges A$20.6 million was deposited into 30 accounts, 29 of which were in fake names, which shortly after was transferred abroad. After the bank identified “repeated, suspicions and connected” patterns of cash deposits, it permitted a further approximately A$9.1 million to be transferred from these accounts to Hong Kong, Austrac said.
