Major lender Commonwealth Bank (CBA) is expected to pay nearly $1billion in civil penalties and legal costs after entering an agreement with AUSTRAC over anti-money laundering and counter-terrorism (AML/CTF) proceedings.
The Australian government’s financial intelligence agency began civil proceedings against the bank in August 2017. This agreement follows a court-ordered mediation between the organisations and remains subject to court approval.
As part of the agreement, CBA will pay a civil penalty of $700million as well as AUSTRAC’s legal costs of $2.5million and that AUSTRAC’s civil proceedings are otherwise dismissed.
The lender has also admitted further contraventions of Australia’s AML/CTF Act, beyond those already admitted, including contraventions in risk procedures, reporting, monitoring and customer due-diligence.
The agreement includes a statement of admissions, including the late submissions of 53,506 Threshold Transaction Reports for cash deposits through Intelligent Deposit Machines; transaction monitoring did not operate as intended in respect of a number of accounts between October 2012 and October 2015 and 149 Suspicious Matter Reports were filed late or not filed as required.
The full statement can be found on CBA’s website.
CBA chief executive officer Matt Comyn said, “This agreement, while it still needs to be approved by the Federal Court, brings certainty to one of the most significant issues we have faced.
“While not deliberate, we fully appreciate the seriousness of the mistakes we made. Our agreement today is a clear acknowledgement of our failures and is an important step towards moving the bank forward. On behalf of Commonwealth Bank, I apologise to the community for letting them down.
“Banks have a critical role to play in combating financial crime and protecting the integrity of the financial system. In reaching this position, we have also agreed with AUSTRAC that we will work closely together based on an open and constructive approach.
“We are committed to build on the significant changes made in recent years as part of a comprehensive program to improve operational risk management and compliance at the bank. To date we have spent over $400 million on systems, processes and people relating to AML/CTF compliance and will continue to prioritise investment in this area.
“We have changed senior leadership in the key roles overseeing financial crimes compliance supported by significant resources and clear accountabilities.
“We have started implementing our response to the recommendations provided to us by our prudential regulator, APRA, to ensure our governance, culture and accountability frameworks and practices meet the high standards expected of us.
“I am also very focused on ensuring we have clear lines of accountability across our entire business. This includes an approach to risk management that recognises the importance of non-financial risks, including an escalation framework that ensures key operational and compliance issues such as these are identified, escalated and resolved in a timely manner.
“These changes are part of a large and concerted effort to become a better, stronger bank - one that earns the trust of our customers, staff, regulators and shareholders. Today is another very important step forward, and continuing to make the changes we need in an open, transparent and timely way is my absolute priority as CBA’s new chief executive.”
CBA will recognise a $700m provision in its financial statements for the full year ending 30 June 2018 which will be announced on 8 August.
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