The Commonwealth Bank of Australia (CBA) board will axe executive bonuses and directors' pay following the money laundering scandal that rocked the bank last week.
Last week, the Australian Transaction Reports and Analysis Centre (AUSTRAC) filed a Federal Court motion to prosecute the bank for almost 54,000 alleged contraventions of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF) laws since 2012.
Following the allegations, the CBA’s board announced that Chief Executive Ian Narev and all senior executives would receive no bonuses for the financial year just ended. Last year, Mr Narev received around $2.8 million in bonuses out of a total pay packet of $12.3 million.
The board has also taken its share of responsibility for the scandal, cutting its own non-executive director fees by 20 per cent for the current financial year.
The action came ahead of the bank posting a record full-year net profit on $9.9 billion today.
On Monday, the CBA tried to blame the violations on a simple coding error. However, AUSTRAC is alleging the bank took three years to identify the coding mistake, did not conduct a risk analysis into the offending ‘intelligent deposit machines’ until years after they were introduced, and failed to provide timely cooperation in several money laundering investigations.
While the bank’s board has considered the issue serious enough to impose financial penalties on executives, it seems to have no appetite for removing those responsible for the failure with chairperson Catherine Livingstone declaring “Mr Narev retains the full confidence of the board”.
As each individual breach carries a maximum penalty of $18 million, the bank could be facing fines totalling about a trillion dollars for the alleged breaches – about seven times the bank’s market value.
If the money-laundering scandal was the only red flag we had seen for reprehensible behaviour by the big banks, it should still be enough for the Government to call for a Royal Commission into the finance sector.
Unfortunately, there have been plenty of other issues and yet still the Federal Government has no appetite to root out the rotten apples and clean up the sector.
Last year, the Australian Securities and Investments Commission revealed that up to 200,000 Australians may have paid for financial advice they never received. ASIC also accused both Westpac and ANZ of rigging bank rates last year.
An ABC Four Corners report also detailed how the CBA’s insurance division, CommInsure, had refused to pay out many legitimate insurance claims to people with terminal illnesses, saving the bank millions of dollars.
This list only scratches the surface of banking complaints and presents a compelling case for a Royal Commission.
This latest scandal alleges the money laundering was used to fund drug syndicates and finance terrorism.
While the other three banks have been quick to distance themselves from this particular issue, they are only in the clear because their machines will not accept deposits larger than $5000. This is well short of the $10,000 limit for reporting suspicious activity to AUSTRAC and only a quarter of the amount that the CBA machines allowed.
The Labor Party has promised a Royal Commission into the banking sector if elected, but so far the Government has stonewalled the idea at every opportunity.
Surely, this latest breach of public trust requires an about face on the issue.
If the Government is as serious about being tough on crime and terrorism as it claims, this latest allegation demands a Royal Commission.
It certainly should result in some senior executives losing more than just their bonuses, which is little more than a slap on the wrist.
What do you think? Is it time for a Royal Commission into the banking sector? Why do you think the Government is so opposed to a Royal Commission?
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