Australia's Largest Bank Breached Money-Laundering Law, Regulator Says

By Robb M. Stewart Features Dow Jones Newswires

MELBOURNE, Australia--Australia's financial-intelligence agency accused the nation's biggest bank of failings it said may have opened the way for money laundering and financial crime.

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In a civil suit filed Thursday in the federal court in Sydney, the Australian Transaction Reports and Analysis Centre alleged that Commonwealth Bank of Australia Ltd. contravened the Anti-Money Laundering and Counter-Terrorism Financing Act more than 53,700 times--each carrying a maximum penalty of 18 million Australian dollars (US$14.3 million).

Nearly all the alleged violations were failures to make timely reports to Austrac of cash transactions of A$10,000 or more, as the law requires.

The bank, Australia's largest by loan volume and market value, acknowledged the lawsuit and said it would comment on the specific claims in due course.

In its court filing, the agency, known as Austrac, said the bank rolled out "intelligent deposit machines," a type of ATM that accepts deposits of cash and checks, in 2012 but didn't assess the money-laundering and terrorism-financing risk until mid-2015. In addition to the late reports on the large cash transactions, it said Commonwealth Bank failed to report on time or even at all millions of dollars in suspicious transactions and didn't monitor customers to manage the risks even after it became aware of suspected money laundering.

Commonwealth Bank said in a statement that it has been in discussions with Austrac and has cooperated fully with its requests. The bank said it has worked to continuously improve compliance, and kept the agency up-to-date on its efforts. The bank also said it reports more than 4 million transactions to Austrac annually in an effort to identify suspicious activity and has invested more than A$230 million in compliance and reporting systems to combat money laundering.

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More than A$5.81 billion (US$4.62 billion) was deposited using the Commonwealth Bank machines in the first half of last year, Austrac said. They accept cash deposits of up to A$20,000, with no limit on the number of times a customer can use them daily. The machines allowed for anonymous cash deposits into Commonwealth Bank accounts, the agency said, since the bank doesn't know details of cardholders from other banks.

The court action should send companies that report to the agency a message about their obligations to fight money laundering and terrorism financing, said Austrac's acting chief executive, Peter Clark.

The agency said suspected money laundering was conducted through Commonwealth Bank accounts via cash deposits into the machines that were followed immediately by international and domestic transfers. In many cases, Austrac said, the deposits were broken into amounts small enough to avoid triggering the bank's reporting obligation. The agency alleges that the bank identified patterns of suspicious activity but failed to report instances in a timely manner, or sometimes at all.

Among the allegations, Austrac said that from late 2014 to August 2015 about A$20.6 million was deposited through ATMs into 30 Commonwealth Bank accounts--29 held in fake names--and transferred offshore. Two people have been convicted of dealing with proceeds from crime and other offenses related to the activity, it said in the court document.

As part of another alleged money-laundering syndicate, the agency said that between June 2014 and January 2015, three people deposited almost A$2.3 million into three accounts and almost immediately transferred the money domestically.

In another example, it said that between February 2015 and May 2016 more than A$21 million in cash--allegedly illicit-drug proceeds--was deposited into 11 accounts held at Commonwealth Bank and transferred to other domestic accounts.

In all, Austrac alleged the bank was late with 53,506 reports on transactions of A$10,000 or more from November 2012 to September 2015 and failed to report on time or at all suspicious transactions totaling over A$77 million.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

August 03, 2017 04:02 ET (08:02 GMT)