15 August, 2017
The Commonwealth Bank of Australia (CBA) has cancelled bonuses for senior staff after money laundering allegations hit the bank.
The Australian Transaction Reports and Analysis Centre (AUSTRAC) initiated civil penalty proceedings in Australia's Federal Court against the CBA last week for "serious and systemic non-compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006".
The CBA installed intelligent deposit machines (IDMs) that allow anonymous cash and cheque deposits of up to AU$20,000 ($16,000) per transaction in May 2012.
However, a coding error in late 2012 meant that the machines failed to send 53,506 threshold transaction reports (TTRs) on transactions of AU$10,000 ($8,000) or more to AUSTRAC, as required.
"These late TTRs represent approximately 95% of the threshold transactions that occurred through the bank’s IDMs from November 2012 to September 2015 and had a total value of around AU$624.7 million ($493.7 million)," AUSTRAC said.
AUSTRAC also alleges that the CBA did not carry out any assessment of the money laundering and terrorism financing risks of the machines before their roll out, or for their first three years of operation.
The CBA responded to say that it "would never deliberately undertake actionthat enables any form of crime. To that end, we scan billions of dollars of transactions daily, and report 4 million transactions a year to AUSTRAC".
The bank notified AUSTRAC within a month of discovering the coding error, it said, delivered the missing TTRs and fixed the coding issue.
"The vast majority of the reporting failures alleged in the statement of claim relate specifically to this coding error.
We recognise that there are other serious allegations in the claim unrelated to the TTRs," the CBA said.
"In an organisation as large as Commonwealth Bank, mistakes can be made. We know that because we are a big organisation, these mistakes can have significant impact," it said.
Senior staff's variable incentives will now be "reduced to zero", chairman Catherine Livingstone said in a statement. Non executive director fees have also been cut by 20% to reflect the board’s shared accountability, she said.
"In reaching this conclusion the overriding consideration of the board was the collective accountability of senior management for the overall reputation of the group," Livingstone said.
For further information, please contact:
Ian Laing, Partner, Pinsent Masons
ian.laing@pinsentmasons.com
