Investors ignored the news that the Commonwealth Bank faces a potentially crippling fine and damages from the financial transaction regulatory agency Austrac after a bombshell announcement from the agency late yesterday (http://austrac.gov.au/media/media-releases/austrac-seeks-civil-penalty-orders-against-cba).
Austrac has launched civil proceedings against the Commonwealth for failing to report thousands of suspicious transactions valued at more than half a billion dollars.
Austrac alleges there were some 53,700 contraventions of the Anti-Money Laundering and Counter-Terrorism Financing Act which requires banks to report cash transactions involving more than $10,000 each.
The maximum penalty for a breach of the money laundering act is $18 million for each breach. With the bank facing 53,700 breaches it is potentially facing a maximum penalty of a staggering $966 billion – a figure that clearly won’t happen.
That’s because the CBA faces a fine with each contravention carries a $18 million penalty under current legislation.
CBA shares ended the day down 0.3% at $83.97, down from $84.16 at the start of the session.
The action against CBA comes after gaming giant Tabcorp (which wants to merge with Tatts) paid $45 million to settle a money-laundering case with Austrac in February of this year.
Austrac claims the Commonwealth Bank failed to inform regulators about suspicious cash deposits in its ATM network, in which money laundering syndicates deposited tens of millions of dollars through the bank.
"CBA failed to give 53,506 threshold transaction reports (TTRs) to AUSTRAC on time for cash transactions of $10,000 or more through IDMs from November 2012 to September 2015
“These late TTRs represent approximately 95 per cent of the threshold transactions that occurred through the bank’s IDMs from November 2012 to September 2015 and had a total value of around $624.7 million.
“AUSTRAC alleges that the bank failed to report suspicious matters either on time or at all involving transactions totalling over $77 million,” the Agency said in yesterday’s statement.
Austrac said it was taking action against CBA, alleging "serious and systemic non-compliance" with the Anti-Money Laundering and Counter-Terrorism Financing Act.
The action alleges more than 53,700 contraventions of the act, mainly through intelligent deposit machines (IDMs), a type of ATM that allows anonymous cash deposits.
Austrac alleges millions of dollars were put into the machines by money laundering syndicates, with some of the cash sent offshore, and some of the accounts connected with drug smuggling.
AUSTRAC says $89 million in cash was deposited in the machines during the first six months of operation between June 2012 and November 2012. Cash deposits through the machines had risen to $5.8 billion during the six months from January 2016 to June 2016. By May of last year, Austrac says more than $1 billion in cash was deposited into Commonwealth Bank accounts using IDMs each month.
It has been speculated that a reason for the massive growth in deposits was a reporting ‘blindspot’ that allowed an individual to deposit funds into a Commonwealth Bank account using the machines without being identified.
Austrac also alleges that even after Australia’s largest bank became aware of the suspected money laundering that it did not take steps to mitigate or manage the risks. AUSTRAC estimates that $8.9 billion was deposited through Commonwealth Bank’s new ATMs before any risk assessment was made.
In a statement, the CBA acknowledged that the civil proceedings had been brought and said it would have more to say on the specific claims “in due course”.
Austrac referred to at least four different money-laundering syndicates that are alleged to have used the CBA IDM ATMs.
