AUSTRAC and CBA Reach a $700 million Settlement

Thursday 19 July 2018 @ 4.03 p.m. | Crime | Legal Research

On 3 August 2017, the Australian Transactions Reports and Analysis Centre (“AUSTRAC”) initiated civil proceedings against the Commonwealth Bank of Australia (“CBA”) for breaches in the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (“the Act”).  The case (Chief Executive Officer of the Australian Transaction Reports and Analysis Centre v Commonwealth Bank of Australia Limited [2018] FCA 930) was to be heard in the Federal Court of Australia. However, a settlement was agreed upon by the two parties prior to the commencement of the hearing. The Federal Court of Australia ordered the settlement to proceed as a civil penalty order against CBA on 20 June 2018. The agreed upon amount was one of the largest penalties ever to be ordered in any court for similar crimes all around the world.

Findings and Final Settlement

The original case was based on allegations by AUSTRAC accusing CBA of 53,750 breaches of the Act, specifically in regards to the anti-money laundering and counter-terrorism financing provisions. Investigations were conducted in partnership with the Australian Federal Police and various state police forces and focused on CBA’s compliance and risk management practices, especially in regards to their Intelligent Deposit Machines (IDMs).

Although accepting several of the allegations that AUSTRAC had initially presented, CBA had originally presented a defence for their case by stating some of these breaches were due to a coding error that occurred in their systems. However, prior to the case being heard in the Federal Court, an agreement was reached by both parties for a settlement amount of $700 million.

In a Media Release on 4 June 2018, AUSTRAC said that:

“In summary, CBA accepted that:

  • it failed to carry out an appropriate assessment of the money laundering and terrorism financing (ML/TF) risks of its IDMs prior to October 2017
  • it failed to complete the introduction of appropriate controls to mitigate and manage the ML/TF risks of IDMs prior to April 2018
  • it failed to provide 53,506 threshold transaction reports to AUSTRAC on time for cash transactions of $10,000 or more through IDMs from November 2012 to September 2015, having  total value of about $625 million
  • for a period of three years, it did not comply with the requirements of its AML/CTF [anti-money laundering and counter-terrorism financing] program relating to monitoring transactions on 778,370 accounts
  • it failed to report suspicious matters on time, or at all, involving transactions in the tens of millions of dollars
  • even after it became aware of suspected money laundering or structuring on CBA accounts, it did not monitor its customers to mitigate and manage ML/TF risk, including the ongoing ML/TF risks of doing business with those customers.”

This settlement amount was officially ordered by the Federal Court of Australia and the penalty was ordered on 20 June 2018.

Responses

Treasurer the Hon. Scott Morrison MP commented in a Media Release that:

“Complying with the law is non-negotiable, especially when it comes to our largest financial institutions that Australians rely on for their homes and businesses and the Government is serious about enforcing any breaches. Banks should be leaders in ensuring their systems cannot be compromised by criminals seeking to launder money or finance terrorist activities … This result will remind boards and managers of financial institutions across Australia that the Government is serious about maintaining a strong financial system where crime can't flourish.”

AUSTRAC has also been praised by Minister of Home Affairs Dutton, Treasurer the Hon. Morrison MP and Attorney-General Porter for their actions in enforcing this law and for their ongoing programs. Their importance in the role that they will continue to play in the protection of the wider community has also been acknowledged by the Government, as an additional $43.3 million in funding will be assigned to them over the next four years.

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products. Nothing on this website should be construed as legal advice and does not substitute for the advice of competent legal counsel.

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