Money laundering scandal costs bank executives their bonuses

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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.

Opinion: The Government can no longer deny us a banking Royal Commission

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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Written by Ben


Total Comments: 59
  1. 0

    Absolutely. The liberals fall over themselves in their haste to have Royal Commissions into anything that may be detrimental to their opponents but the banks seem to be sacrosanct. High time for a thorough investigation….or a change of government.

  2. 0

    This is the ‘next’ scandal and even the serious finger waving at bank executives did not stop it. But why would it.
    We need a government to regulate the banking industry and more importantly to split up the large institutions. Other countries have much smaller banks and we need that in Australia the same as we need the influence and control of the Murdoch empire broken down.
    I cannot believe that what is blatant refusal to obey the rules is being treated as a coding mistake’. That is a total lot of BS and only a coalition government run by an ex banker could ever accept this is a reason for what has happened. They all knew what was happening. It was intentional and the CEO needs to be sacked and/or have criminal charges laid against him. The loss of bonus is no punishment because the bonus will likely be doubled next year or the year after when all is forgotten.

    • 0

      Agree, sack the CEO and all Managers involved in this software update.

    • 0

      Bring back the Commonwealth Bank to the people. The other banks should become no more than administrators of accounts. Basically they are parasites and only create debt. Perhaps even get rid of them as the Icelanders did. They created the Iceland Bank and its is owned by the people and the government. It did what basically Australia did before political interests took over. It created the needed money and gave industry interest free loans, knowing that once industry was supported they would grow and employment would be created and the government would claw back the loans in taxes.
      Australia built, as I have said often, the Nullarbor Rail without loans. The government created the finance based on our gold reserves. The rail was completed. Everyone was paid and there was not debt and no interest. Vested interest ensured that did not happen again. There are other small dynamic countries doing the same. It works but the banks see they would be left out of such a system, therefore they would not be able to create debt and make money from the interest they charge. It was a Scottish Engineer that designed the concept and it was tried out successful but the baking industry in London had it dismantled.

  3. 0

    Corrupt Behaviour is a Human Behavoural Virus and No Organisation is devoid of it!
    A Royal Commission will cost the Taxpayer a fortune but not get the Results….ie Remove the Inept Managers & corrupt people.
    Because the Govt has been brainwashed that De-Regulation works! De-Regulation is Self Regulation….yeah that’s going to work?
    Just as Workcover has Inspectors checking on the fly…..unannounced investigation/inspections/audits….so should the Banks.
    Whst is missing here is the Death of Independant Administrators to oversee Computer Programs and changes to ensure there are No Loopholes in the systems that can be exploited through collusion or fraud/criminal activity!
    Long ago…..ages in reality….Hospitals were run by Proffesional Administrators and counterchecked by Highly Competsnt Outside Auditors contracted to Government NOT the Hospitals.
    It is time that this System was adopted for the Banks there Systems are checked/audited regulary!
    Currently programmers only answer to Unqualified Managers.
    Administration Systems are a Highly Specialised Area that do all the checks and balances to avoid catastrophic Failures of Legal & Ethical requirements.
    The Govt have been defrauded by removing these systems to save money and apply Self Regulation!
    Schools ripping them off….Child Care….Private Traing Schools etc etc etc. and the Fraudulent Claims are in the Millions & Millions of tax payer $.
    Time they woke up to themselves!
    Self Regulation caters for FRAUDSTERS!

    • 0

      Reading about union girl Kathy J, talk about stupidity thievery corruption , it definitely is a human virus , and the union movement has so much to answer for , including Mr Shorten who is not fit to hold the office of PM. And that’s from a union person active and a rep for 25 years. My side of politics leaves me cold now, the Liberals have proven that they simply want to rule nothing more or less , just hold power, then the unions (from experience) do nothing but make money and get donations, the Labor party do absolutely, in the main , nothing, for the PEOPLE! All of these organisations are having a huge lend of us all!
      So who the hell do you vote for, Pauline is stupid, Bernardi is too far right , the Greens are a hopeless over left batch of delusional fools that’ll have us swamped with so many different people we won’t be Australia and we’ll all be out of work or dead.
      And here we are with wealthy bankers who even when warned did nothing, are loaded with more money than they could ever hope to spend in their lives. And committing something illegal , and what they lose a bonus, I’d be in prison, who are these damned people who are so wealthy , well they are damned that’s who they are.
      And their time is here!

  4. 0

    As for the CEO and Top Tier Managers…the buck stops with them!
    They are highly paid to ensure these things DO NOT OCCUR ON THEIR WATCH!
    Removing bonuses is a joke!
    They should all be Sacked Immediately and Replaced. The Same applies to the Board.
    The Banks have no hestation in removing non performing staff… Why not the Managers who failed to ensure compliance?
    This proves there is Collusion at that level to protect each other!
    I say Sack the ones in charge of the Systems that allowed the Money Laundering Now!
    And investigate the others!

    • 0

      Quite right, NSY.

      Coding error is caused by a dope employee, put there by dope Managers who did not get it properly tested, implemented by dumb (but cheap outsourced vendor) staff, the latter appointed by dumb or corrupt Managers – all of the latter up to the CEO getting bonuses for dishing out such sub-standard work done by cheap overseas staff being therefore complicit – hence all deserving to be sacked!

    • 0

      If they do sack them all, NSY, that might encourage the replacements to behave themselves, or they will go the same way if they don’t. What is this government frightened of by the words “Royal Commission” , being found in collusion with them, and not wanting to upset their apple cart( take that whatever way you want ).

    • 0

      More likely they are highly paid to tell enormous lies while showing their “honest face” to TV cameras. Sack one and another one is ready to take their place.
      Time for the Australian Government to admit they have no control over anything and to act now to legislate a banking system we can be proud of.

  5. 0

    They are at the top of the tree and as such are ultimately responsible for the actions of their organisation. Sure to dismiss all at once may cause problems but start at the top and work down one by one. To many activities in this bank have led to only minimum punishment. If the bank is found to be guilty of law breaking then so are those responsible for the day to day operation of the banking facility and as such they must st.and trial and if convicted pay the penalty. No short change in this aspect – guilty – appropriate sentence.

    • 0

      Too big to fail? So you let them off with a non sentence? Sounds like that is how this is going to play out.
      I am starting to agree with Shorten. We do need a RC into the financial sector and then GENUINE reforms with teeth. That ain’t going to happen.

  6. 0

    No matter what wisdom or otherwise is opined here, nothing worthwhile will occur. Sack the bosses? Not happening. Control the banks? Not happening. Make you and I pay for unnecessary services? Hmm, now what else can we think of!

  7. 0

    The only thing that will pull a business, such as a bank, into line is a custodial sentence for the guilty party and that person is the one at the top.
    The business culture is set from the top downward so the culture of the Banks is set by the Board, either through deliberate action or neglect. The “buck stops at the top” not at some intermediary who was working within the culture set by those above.
    A Royal Commission is well overdue and the BIG question is why is the current Government providing support for the Financial sector? Is this the cutting edge of a corrupt political system where donors to political parties are calling the tune and effectively running the country?
    Why don’t we have an effective Federal ICAC keeping a watch on our politicians and their mates?

  8. 0

    The fact that they get bonuses should tell us how real this really isnt.

  9. 0

    Wow! They still get paid for turning up to the meetings where a good red and a nice free lunch is provided but, apparently, very little business is discussed. Sackings at or near the top is the only way that this scandal can be shown to be dealt with. The last scandal where retirement funds were lost due to mismanagement was swept under a very large carpet at the CBA is about to happen all over again.

    • 0

      I so want to be a chairman of the board. Better still – fail at the job and you get a large bonus payout to leave. Such a corrupt enclave. How does anyone justify a $12m salary?
      If they earned it, fine – but this is other people’s money.

    • 0

      Gerry Harvey, a respect Businessman, said once that no one deserves to earn more than $1 Million salary! Maybe the Govt should legislate that no one can be paid more than the Prime Minister! Or tax them at 90% rate above that.

    • 0

      George they then would probably demand and get $100 million dollars per annum so they could still clear $10 million.

  10. 0

    Seeing that nearly all of our super is in the big banks such as CBA, plus all the mum and dad investors, and working class and retirees have rely on the CBA dividends, this IS NOT an attack on the banks, but on the retirees. We have become too well of and need to be pulled down. 40years ago my economics lecturer told his class that it is NOT about the money, its about control. If you found a mountain of gold and gave it the Gov, they would say thank you very much, build a couple of aircraft carriers, send most of it overseas in foreign aid, and still say there is no money for welfare, schools hospitals, If the Gov ever needed more money, they would just print more money. Its all about controll, and we need to peg the banks back, the retirees. WAVE GOODBYE TO THE CBA YOU WAVE GOODBYE TO YOUR SUPER YOU WAVE GOODBYE TO YOUR RETIREMENT

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