Commonwealth Bank anti-money laundering breach allegations


The Commonwealth Bank of Australia (CBA) is dealing with allegations that it committed over 50,000 anti-money laundering breaches.

On 3 August 2017, Australia’s financial intelligence agency, AUSTRAC, started civil proceedings against CBA.

AUSTRAC claims CBA breached the Anti-Money Laundering and Counter-Terrorism Financing Act 53,700 times.

The allegations concern CBA’s roll out in May 2012 of its Intelligent Deposit Machines (IDMs), which customers use to deposit cash and cheques.

It’s said CBA failed to identify certain deposits made via the machines as suspicious. Nor did it submit correct transaction reports to AUSTRAC in the correct time – which can attract fines of up to AUD$18 million.


Commonwealth Bank’s role in assessing money laundering risks

The CBA case highlights the role banks play in assessing ML/TF risk. Financial institutions must uphold high standards to combat ML/TF.

The law imposes various obligations on ‘reporting entities’ such as CBA. For example, there’s a key obligation to establish a AML/CFT program to identify, mitigate and manage ML/TF risk.

According to AUSTRAC, CBA did not adequately assess the machines’ money laundering and terrorism financing (ML/TF) risk between May 2012 and September 2015. In particular, AUSTRAC says CBA failed to:

  • comply with its AML/CFT program
  • carry out ongoing due diligence
  • report 53,506 threshold transactions totalling $624.7 million
  • report suspicious transactions totalling over $77 million


Fintech and regtech implications of Commonwealth Bank case

For the Bank’s part, it argues that the breaches occurred as a result of a coding error. This error, the Bank says, prevented its machines from raising the red flag on so-called ‘threshold transactions’ of over $10,000.

For this reason, commentators, in analysing CBA’s use of deposit machines, will almost inevitably focus their scrutiny on the rise of technology in financial services, or ‘fintech’.

But fintech is only part of the story. The other part concerns ‘regtech’.

Regtech – the use of technology to facilitate regulation and promote cultures of compliance – is a burgeoning field. And it’s rapidly transforming the way organisations are preventing and identifying breaches.

So this case poses an interesting question about how regtech can assist reporting entities like CBA. Does a better way exist to embed ‘compliance by design’ into deposit machine technology?

Or to put things differently: what’s the most effective, most secure way to identify red flags, before either reporting entities or the regulators have to identify suspicious transactions manually?



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Terrorist financing on the rise, says AUSTRAC

Australia’s financial intelligence agency, the Australian Transaction Reports and Analysis Centre, (AUSTRAC), received 81, 074 “suspicious matter reports” in the last financial year. 536 were identified as linked or potentially linked to terrorism.

That’s a 300 percent increase in the number of financial transactions suspected of being linked to terrorism.

“2014 was the deadliest year for terrorism on record,” AUSTRAC Chief Executive Paul Jevtovic has said.

A key concern is Islamic State (IS). According to an ABC News report, AUSTRAC has compiled a financial profile of “those Australians who decided to go overseas to fight with IS, or other terror groups, or who supply financial support.”

The report identifies financial behaviours common to terrorist sympathisers who plan to travel to Syria or send money to terrorist groups.

“Whether it is a terrorist act or crimes by organised criminals there’s always a financial DNA if you like,” Jevtovic added.

The total value of terrorist financing cited in the suspicious transaction reports accumulated by AUSTRAC in the past financial year is approximately AUD$53 million.
According to Jevtovic, “We are not saying that $53 million was for terrorism financing, but in amongst the legitimate money that has been sent are examples and evidence of support for terrorism groups.”
190 Australians are suspected of providing financial or recruitment support to groups such as IS in Syria. Another 110 are suspected of travelling to Syria to fight for IS or other groups.

Source: ABC News

Talk to GRC Solutions today about our Anti-Money Laundering and Counter-Terrorism Financing courses, as well as our broader Salt Compliance online training library.

1 June is Looming – Are you ready for the latest Anti-Money Laundering changes?

The AML/CTF regime implements Australia’s international AML/CTF obligations under the international Financial Action Taskforce (FATF).  The regime aims to provide a balance between efficient conduct of business and effective regulation to combat money laundering and terrorism financing.

Over 13,000 Australian organisations have enrolled with AUSTRAC since 2007 as reporting entities that are vulnerable to exploitation for money laundering and terrorism financing.

The latest amendments to the Anti-Money Laundering and Counter Terrorism Financing Rules Instrument 2007 were released on 9 December 2013.

These amendments primarily relate to the AML/CTF Rules for customer due diligence and will come into effect from 1 June 2014.

Are you prepared?
The amended laws require businesses to comply with enhanced customer due diligence procedures for politically exposed persons and beneficial owners, as well as requiring organisations to find out the customers’ source of wealth and funds, nature of the business relationship with the customer and the customers’ corporate control structure.

Beyond this, each business must assess the risks of potential money laundering or terrorism financing when providing a designated service to a customer. These new amendments are designed to assist regulated businesses to identify suspicious matters and report them, regardless of their own perceptions of risk.


GRC Solutions
We have now updated our AML/CTF online compliance course content to reflect the latest amendments to the AML/CTF Rules. We have also improved accessibility of the course for users in order to promote speed to competence. Our courses explain the rules in plain English, accompanied by rich visual designs and layers of interactivity.

Are you finding remaining compliant with the AML/CTF laws a challenge today?