An Australian Government Financial Intelligence Agency Makes History With A Legal Case Worth A Trillion Dollars
An Australian bank is accused of over 53,000 contraventions of money laundering and counter-terrorism financing laws.
Yesterday, Australian history was made when the Australian Transactions Reports and Analysis Centre (AUSTRAC) took legal action in the Federal Court with a Notice of Filing against the country’s biggest bank, the Commonwealth Bank (CBA).
Authorities have accused the Commonwealth Bank of “serious and systemic non-compliance” with the Anti-Money Laundering and Counter-Terrorism Financing Act (AML/CTF) on 53,700 occasions since May 2012. AUSTRAC acting CEO Peter Clark said an investigation into CommBank was launched regarding its use of intelligent deposit machines (IDMs) following instances of criminal syndicates laundering millions of dollars from Australia to a foreign country. Generally, IDMs are a type of ATM that accepts deposits by both cash and cheque.
AUSTRAC alleges IDMs facilitate anonymous cash deposits. When a deposit is made through an IDM, it is automatically counted and credited so the funds are immediately available. Usually there are restrictions on how many notes IDMs can accept per deposit. For example, $20,000 per cash transaction. The machines have been so popular that by June 2016 $1 billion was being deposited each month. But AUSTRAC claims CommBank does not limit the number of IDM transactions a customer can make each day, which makes it easier for large amounts of money to be transferred to other accounts both domestically and internationally. It did not take long for criminal syndicates to exploit this loophole.
Between November 2014 and August 2015, the proceeds of major drug traffickers totalling $27.2 were made to one account and almost transferred offshore. Similarly, in late 2014 and mid-2016, four syndicates deposited a total of $90 million with CBA. In another case, a group of men laundered millions of dollars through CBA to Hong Kong in five weeks during mid-2015. It is estimated the repeated occurrences of massive money laundering had a staggering total value of $624.7 million.
This has led the regulatory agency to further accuse Commbank of failing to report suspicious transactions of over $10,000 made through IDM to AUSTRAC in time for assessment, as required by anti-money laundering laws. Despite receiving warnings from law enforcement, Commbank failed to implement sound systems and controls to prevent money from being misused for criminal purposes again in the future. This is not the only allegation AUSTRAC is making against Commbank. In a media release, AUSTRAC reveals Commbank committed many breaches for a period of years:
- CBA did not comply with its own AML/CTF program. It did not conduct any assessments of the money laundering and terrorism financing risk of IDMs before introducing them in 2012, nor did it take steps to assess the risk three years after.
- For three years, CBA did not comply with the requirements of its AML/CTF program relating to monitoring transactions on 778,370 accounts.
- CBA failed to give 53,506 threshold transaction reports to AUSTRAC on time for cash transactions of over $10,000 through IDMS from November 2012 to September 2015.
- The value of the threshold transaction reports amounted to an estimated $624.7 million.
- The bank failed to report suspicious matters on time or at all involving transactions of over $77 million.
- CBA did not monitor its customers to mitigate and manage money laundering and terrorism financing risk.
Mr Clark hopes the civil action sends a clear message about the severe consequences and potentially high cost of failing to meet anti-money laundering laws. He said: “AUSTRAC’s goal is to have a financial sector that is vigilant and capable of responding to threats of criminal exploitation.” However, this is only possible if industry partners work collaboratively with the regulatory agency, and demonstrate a strong commitment to it.
In a statement, CommBank acknowledged in a statement it has “been in discussions with AUSTRAC for an extended period and have co-operated fully with their requests.” Finally, Commbank emphasised it takes its regulatory obligations extremely seriously, and disclosed over four million transactions were reported to AUSTRAC annually.
It will be interesting to watch how this case will unfold in the Federal Court, and whether Commbank will make changes to prevent criminal exploitation in the future.
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Fiona is a Paralegal working in our content team which aims to provide free legal guides to facilitate public access to legal resources. With an interest in information, media, consumer and employment law, her primary focus is on how technology will affect the future of the legal industry.