Yesterday, the Commonwealth Bank (CommBank) reached a settlement with financial intelligence agency Austrac over breaches of money laundering laws. The bank has agreed to pay $702.5 million and you won’t believe where that money will go.
In a statement to the Australian Securities Exchange (ASX), CommBank said it had admitted to:
- late filing of 53,506 threshold transaction reports for cash deposits through intelligent deposit machines (IDMs)
- inadequate adherence to risk assessment requirements for IDMs on 14 occasions
- transaction monitoring did not operate as intended for a number of accounts between October 2012 and October 2015
- 149 suspicious matter reports were filed late or were not filed as required
- ongoing customer due diligence requirements of 80 customers were breached.
While the Federal Court is still to approve the size of the fine, $2.5 million of it has been pegged for Austrac’s legal fees, and the balance – $700 million – is likely to go to Finance Minister Kelly O’Dwyer’s department.
Under the legal system, if the Federal Court imposes a fine, it must make an order requiring the payment to be paid to a registrar. The registrar then pays the money into a government consolidated revenue fund.
It is possible that the court will order that some of the money be paid to a cause or a different department to help fund, for instance, the war against criminal money laundering.
But a source at ASIC told YourLifeChoices that it would not be unusual for the entire sum to go to consolidated revenue.
“Last November, the Federal Court’s fines on National Australia Bank and ANZ stipulated that each pay an additional $20 million to benefit the community,” the source said.
In March last year, Tabcorp was fined $45 million for breaches of anti-money laundering and counter terrorism financing laws. At the time, it was reported that the fine was believed to be the biggest in corporate history.
The CommBank settlement is more than 15 times greater than that amount. It relates to the bank failing to monitor large transactions, potentially up to $200,000 on nearly 780,000 accounts. Some of these were linked to drug manufacturing and importation of illicit substances.
Just as the revelations were making headlines in August last year, CommBank posted a full-year net profit of $9.9 billion.
On the stock exchange, news of the fine was welcomed, with the bank’s shares gaining around $1.03, or 1.5 per cent in value. That is the equivalent of a $1.76 billion growth spurt to its capitalisation in just one day, and rather dwarfs the fine. The upwards movement tended to suggest that the market may have estimated the fine would be much higher, even in the 10s of billions, if the maximum penalty had been handed down.
However, with the stock trading at around only $69, it is the lowest it has been in five years. And it is well down on its peak of above $90 three years ago.