Tuesday, 8 August 2017

"Which Bank?" Allegations of est. 1,610 suspect financial transactions possibly involving money laundering or terrorism funding

Calls for a royal commission into banks and banking practices will probably grow louder.......
ABC News, 3 August 2017:
The Australian Transactions Reports & Analysis Centre (AUSTRAC) today launched civil proceedings in the Federal Court alleging that the Commonwealth Bank failed to comply with the law on 53,700 occasions.
The allegations follow an AUSTRAC investigation into the CBA's use of intelligent deposit machines (IDMs) between November 2012 and September 2015.
The maximum penalty for each of the 53,700 contraventions is up to $18 million.
The potentially massive penalties would dwarf a $45-million fine imposed on Tabcorp earlier this year for failing to comply with anti money laundering and terror financing laws…..
The transactions in question had a total value of around $624.7 million.
ABC News, 7 August 2017:
The Commonwealth's allegations about the extent of the breakdown of CBA's legal obligations are breathtaking.
Reading between the lines in the statement of claim, it would appear Australian Federal Police (AFP) investigating at least four money-laundering syndicates discovered Austrac had no transaction records on those they had under surveillance.
In August 2015, CBA provided authorities with details on two of those missing transactions. Clearly, that caused panic within the bank. For just a month later, it sent Austrac details of a further 53,504 transactions dating back three years where $10,000 or more had taken place.
At least 1,604 of those late filings related to criminal gangs. Even more alarming, a further six filings related to five customers the bank itself had identified as posing a terrorism risk. But, incredibly, it didn't report them.
That is not the end of it. According to the statement of claim, the bank continued to facilitate transactions for drug syndicates even after being alerted by the AFP.
Even as late as January this year, 18 months after the breaches were first discovered, it is accused of failing to report suspicious transfers totalling $320,000 over five days.
The calamity is being sheeted home to the installation of whiz-bang new machines, intelligent deposit machines.
These accept cash or shares, count the money and then deposit it into a CBA account. From there, it can be sent almost instantly to anywhere in the world. And the neat thing, from a criminal or terrorist viewpoint, is that you do not have to be a CBA customer to do it.
Not only that, they would take up to $20,000 at a time. The machines may be intelligent but, sadly, no-one at the bank seemed to give a second thought to the reporting duties, either around the $10,000 limit or to look out for "structured" transactions — those attempting to fly just under the radar with slightly smaller amounts.
When they were first introduced in 2012, they proved popular. Almost $90 million went through in the first six months. That has since risen to around $1 billion a month.
As the debacle unfolded last week, the other banks — all of which have introduced similar machines — were keen to distance themselves from the drama, even if ANZ boss Shayne Elliott lamented that all would suffer.
Each said they had removed "non-compliant machines", whatever that means. For it is not the machines that are at fault. It is the oversight that has failed.
Interestingly, each of the CBA's three main rivals were keen to emphasise that their machines would accept a maximum of $5,000. In effect, that means no single transaction would ever come close to the reporting limit, thereby letting them off the hook……
The odds on a royal commission have now shortened dramatically, for the Turnbull Government's resolve to resist one must now be spent.
Not only that, the banks have lost any moral ground they may have thought they had in opposing the Federal Government levy.
If recent history is anything to go by, the bank and its leaders merely will attempt to pretend it is all a media beat-up and it is business as usual.
There will be the usual contrite statements, the promises of improving systems to ensure there is no repeat, an internal inquiry no less, most likely as early as this week when Mr Narev unveils a $9.8 billion profit.
This time, however, the attack will not be so simply to parry. It is not an angry but disorganised customer base baying for blood. These are issues of national security and the prospect of a concerted legal assault by the Australian Government solicitor.
Hold the bonuses? The fallout is likely to be somewhat larger.
Commonwealth Bank, ASX announcement, 4 August 2017:

Commonwealth Bank response to media reports regarding AUSTRAC civil proceedings

Friday, 4 August 2017 (Sydney):

Commonwealth Bank of Australia notes the media coverage of the civil penalty proceedings initiated yesterday by AUSTRAC for alleged non-compliance with the Anti-Money Laundering and Counter-Terrorism Finance Act 2006. The matter is subject to court proceedings. We are currently reviewing AUSTRAC’s claim and will file a statement of defence. We will keep the market informed of any updates in compliance with our disclosure obligations.

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