CBA agrees to pay $700M penalty as AUSTRAC settlement

Commonwealth Bank of Australia (CBA) announced Monday that it has agreed to pay $700 million to settle the anti-money laundering and counter-terrorism case brought by the Australian Transaction Reports and Analysis Centre (AUSTRAC). The penalty fee is still subject to court approval.

In August 2017, AUSTRAC launched proceedings against CBA for breaching anti-money laundering and counter-terrorism-financing laws by failing to monitor transactions through its Intelligent Deposit Machines (IDMs). CBA admitted to the 53,506 breaches, leading to the largest civil penalty payment in Australia’s corporate history.

It also admitted to inadequate adherence to risk assessment requirements for IDMs on 14 occasions, as well as transaction monitoring that did not operate as intended in a number of accounts between October 2012 and October 2015. CBA also admitted to late-filing or not filing 149 Suspicious Matter Reports as required, and to breaching ongoing customer due-diligence requirements in respect of 80 customers.

“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,” CBA CEO Matt Comyn said. “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.”

CBA has agreed to pay a civil penalty of $700 million, as well as AUSTRAC’s legal costs of $2.5 million. If approved by the court, AUSTRAC civil proceedings against CBA would be dismissed.

As part of the settlement, CBA will also work closely with AUSTRAC to implement some changes that will improve the bank’s processes and approach.

“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,” Comryn, who replaced former CEO Ian Narevs in August, said. “Today is another 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.”

The bank estimated it would pay $375 million in penalty in the half year ending Dec. 31, 2017. It will record the $700 million provision in its results for the half year ending June 30.