9th Aug 2017

Money laundering scandal costs bank executives their bonuses

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CBA to block executive bonuses
Ben Hocking

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?

Related articles:
Will CBA scandal break the bank?
Banking tribunal not needed
Watchdog to oversee finance sector





COMMENTS

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Strummer
9th Aug 2017
9:46am
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.
MICK
9th Aug 2017
10:04am
But that's different..... Always is.
MICK
9th Aug 2017
10:03am
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.
George
9th Aug 2017
1:14pm
Agree, sack the CEO and all Managers involved in this software update.
professori_au
9th Aug 2017
9:50pm
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.
Not Senile Yet!
9th Aug 2017
10:13am
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.
Why?
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 ..so 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!
john
9th Aug 2017
4:03pm
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!
Not Senile Yet!
9th Aug 2017
10:21am
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.....so 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!
George
9th Aug 2017
1:19pm
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!
FrankC
9th Aug 2017
1:50pm
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 ).
ktg
9th Aug 2017
4:27pm
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.
dougie
9th Aug 2017
10:36am
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.
MICK
9th Aug 2017
10:54am
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.
Crowcrag
9th Aug 2017
10:51am
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!
Tom Tank
9th Aug 2017
11:08am
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?
TREBOR
9th Aug 2017
5:02pm
.. and some hefty RICO-ing... sell up their assets to recoup losses...
Ted Wards
9th Aug 2017
11:10am
The fact that they get bonuses should tell us how real this really isnt.
Old Man
9th Aug 2017
11:10am
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.
Rosret
9th Aug 2017
12:11pm
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.
George
9th Aug 2017
4:04pm
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.
arbee
9th Aug 2017
7:47pm
George they then would probably demand and get $100 million dollars per annum so they could still clear $10 million.
mike
9th Aug 2017
11:23am
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
mike
9th Aug 2017
11:23am
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
Suze
12th Aug 2017
9:09am
In agreement with your thoughts Mike
Linda
9th Aug 2017
11:24am
Just watch the justice of this. One set of rules for the big end of town while other folks go to jail for often small acts that are against the law. We need a justice system that acts the same for all Australian's. Money Laundering goes hand in hand with other crime, and perhaps while expensive we may need to clean out white collar crime in high places.
Linda
9th Aug 2017
11:24am
Just watch the justice of this. One set of rules for the big end of town while other folks go to jail for often small acts that are against the law. We need a justice system that acts the same for all Australian's. Money Laundering goes hand in hand with other crime, and perhaps while expensive we may need to clean out white collar crime in high places.
Not a Bludger
9th Aug 2017
11:50am
Typical of Four Corners and the lefties.

Tear down our big four banks at all costs and, in the process, destroy the underpin of the Australian economy and the largest contributors to all of our superannuation.

CBA is a world class bank by any measure and standard - it's senior management, over the years, deserve our praise and respect not the brickbats that the lefties continuously keep trying to throw.
TREBOR
9th Aug 2017
1:34pm
**picks jaw off floor**
trood
9th Aug 2017
2:16pm
eh?!
TREBOR
9th Aug 2017
5:04pm
The Ibrahims are world class drug dealers by any measure and standard - we should fall on our knees and thank them for keeping up the supply and for saving the economy...
Rosret
9th Aug 2017
12:08pm
Yes - its a pointless wrist slap. However fining a company only hurts the companies clients not the the executives. If there was an error then so be it and fix it. If there was a crime - send those responsible to goal.
Boomah52
9th Aug 2017
12:18pm
Their bonuses? To the people who live in the real world and don't have lottery size winnings as a yearly salary this is obscene.
KSS
9th Aug 2017
12:35pm
Oh please people, have some compassion! POOR Mr Narev has to make do this year with 'just' his $10m+ salary and his Board members are 'losing' 20% of their salary too!

How will they manage???? I am sure like the rest of us (if we were fortunate enough to get an annual bonus - I am not BTW) they had earmarked that money for something and now their hopes have been thwarted, nay - dashed unmercilessly!

We had better set up a 'gofundme' page immediately to help them out!!!!!
floss
9th Aug 2017
1:19pm
Not a bludger you do not tear down the CBA there is no need just jail the CEOs you are trying to defend the indefensible.
Gee Whiz
9th Aug 2017
1:23pm
A well-written article Ben.

The CBA is the Godfather of all the crooked banks in this country. They are corrupt to the core and a Royal Commission is long overdue.

Unfortunately, they fill the election coffers of the LNP so I wouldn't be expecting too much action from them.

It will be interesting to see that if the ALP are elected they will follow through with their promise of a Royal Commission.

Frankly, i think the banking industry will buy them off in the same fashion as the Turnbull regime.
TREBOR
9th Aug 2017
1:32pm
Fair enough in light of the lack of control leading to the money laundering scandal. Pay for performance... lucky to not be on the street....
Travellersjoy
9th Aug 2017
1:37pm
Want to bet?

The IPA/LNP are milking whatever they can before being consigned to the rubbish bin. They have no intention of doing anything practical, serious, or effective to prevent banksters continuing in their thieving ways.

Millions of our money on a BIGOT"S PLEBISCITE, because they won't do what they were elected to do -take responsibility for legislating equal marriage. Millions of our money to pursue unions, and now policing the private lives of public servants, but banks, don't make me laugh.
KSS
9th Aug 2017
2:52pm
Actually Travellersjoy 'they' were elected on the promise of holding a plebiscite on same sex marriage - not legislating it. To not hold the plebiscite would be another broken election promise.

And just because some may not agree with same sex marriage does NOT make them bigots.

No doubt you support Mr Shorten's promise of a plebiscite to decide whether Australia should become a republic if he wins the next election. A plebiscite that would also cost millions of dollars for a decision that has already been rejected more than once.

Or is it only the NLP you object to holding pleniscites?
Raphael
9th Aug 2017
1:42pm
Great result for CBA
10 billing n profit
Keep up the good work CBA
Raphael
9th Aug 2017
3:51pm
Oops meant $10 billion
Old Geezer
9th Aug 2017
2:44pm
From what I know of the banking and computer industry it would not surprise me that AUSTRAC supplied all the banks with the coding template and/or the actual code so all banks reported the same information. The bank would only be at fault if it altered this code without informing AUSTRAC.

I have a feeling that AUSTRAC is not going to come out of this smelling of roses.
Captain
9th Aug 2017
4:45pm
For once I agree with you OG.
Dollars over Respect?
9th Aug 2017
2:57pm
Yes, just losing their incredibly excessive bonuses - once - is outrageous!
How can an egalitarian society prosper, fairly, when such actions go unpunished. The whole executive should, and must, be sacked. The troubling thing is that we have come to accept that our leaders (political or business) are not expected to be ethical in their dealings. Lies, untruths and misrepresentations of the facts have been excused by the Courts (thanks to expensive, clever legal representation) and the general, lethargic population for far too long - look now where it's ended up. Anyone in a position of power, who is found to be corrupt or dishonest, should have no place in our Australian leadership community - they should be publicly shamed. Lives are destroyed by senior administrators and people holding positions of trust being 'excused' for a multitude of deceitful, greedy behaviours. There is little praise, honour or personal pride in doing an outstanding job anymore - it's about getting themselves more money by squeezing out more profits for shareholders (largely as a consequence of their ridiculous self-written contracts, designed get bonuses for themselves}. The result of such excesses is a total lack of mutual respect from, or for, anyone. As a society, we must stop admiring people who manage to accumulate great wealth, particularly when it is demonstrated that it has been at the expense of others. In fact, any CEO or senior executive is totally expendable and this is an occasion where this rightfully should be demonstrated. However, just where are those who have the strength of character to take the appropriate action of firing the lot (not on the Board!)? None of them are going to hop off the 'gravy train' voluntarily. I despair of the acceptance of blatant nepotism and the growing power of self-interest groups prevailing in today's society. History repeats itself over and over.
floss
9th Aug 2017
3:46pm
Great comment Dollars over Respect I hope Raphael does read and heed.
john
9th Aug 2017
3:48pm
They must go to court , they may need to go to jail. That's what I want to see.
What with the government falling to pieces, the unions as corrupt as the mafia, these bankers are fair dinkum scum bags of the lowest greedy order! And Kim fatty Un wants to blow up Guam.
billy boy
9th Aug 2017
4:32pm
poor buggers, millions in base pay, no bonuses, hurts soo much, lol ;0
Anne Ozzie
9th Aug 2017
5:08pm
Royal commissions cost a lot of money and the government is not bound by the results. I think we need a change of government. Also agree with Mick totally - not just a coding mistake. Split the banks up and charge every one involved
Garry
9th Aug 2017
5:10pm
Be careful what you wish for here. The Banks are already strongly regulated, especially since the GFC, and there are many controls on them.
This country, all countries, need strong banking entities, and that is what Australia has at the moment.
Also, perhaps we should wait for the outcomes of any audits/reports on this matter before we get too carried away with any actions on the bank and it's staff.
Wstaton
9th Aug 2017
5:18pm
Isn't it amazing the upper echelons cause this maybe costing the bank billions and get a slap on the wrist. A teller makes a simple mistake probably costing a few dollars an probably get the boot.
Bugger
9th Aug 2017
7:16pm
$12.3 million last years pay and no bonus this year that a bit tough on a battler !
arbee
9th Aug 2017
7:43pm
Before we have a royal commission into banks I think one into the whole power supply industry should be first. That is hurting our pockets much more than the banks have.
professori_au
9th Aug 2017
8:02pm
It is obvious the fines are insufficient deterrents. Gaol time for those in executive positions my bring about better governance and accountability
Crimmo
9th Aug 2017
8:50pm
They need to lose more that their bonuses. Where the bank's actions or inaction constitutes a criminal offence, the bank's Directors should be held personally liable. Financial penalties should be imposed on the bank and also on each Director. The bank's income from deposit fees on illegal money deposited should be confiscated by the government as proceeds of crime. Profits are down, down, down... The other big banks will be up to their necks in this as well. They just haven't been caught out.
heemskerk99
9th Aug 2017
9:34pm
typical comments in these articles, have they been found guilty by the courts of the land or is this the usual reply of the unwashed contributors to these columns
professori_au
9th Aug 2017
9:42pm
Hmmm! The banks have been found guilty of governance. However, it is their executive that has allowed it to happen and while they have not been called to the courts Yet! They are guilty of a failure of duty of care and to carry out due diligence to see that what happened did not happen. That is why I believe they should go before the courts and suffer gaol term if found guilty. It is no good hiding behind the "I was only doing what I was told" Remember the Nuremberg code which stated along the lines that this excuse is not an excuse.
TREBOR
9th Aug 2017
11:17pm
Give the peasants time - one day they'll awaken into their power and all goes down before....

You should read Intervention and Revolution by Richard K Barnet for some pointers on what eventually tips a compliant populace over the edge....
bike30
10th Aug 2017
9:34am
What if every customer withdrew their money from the bank, is this a drop in the bucket?
bike30
10th Aug 2017
9:40am
That should be all their savings from the bank, or is this only a tiny drop from the bucket?
Josie4
10th Aug 2017
5:05pm
Boo Hoo. Watched the CEO interviewed on Four Corners when the insurance part of CB would not pay out to people with terminal illness and injuries. He was the most wishy washy CEO I ever heard interviewed. He even stated then "We've made mistakes" It's his catch cry. Nothing happened of course and now another scandal on his watch. He has to go.


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