MELBOURNE, Australia--Australia's largest bank has blamed a coding error for tens of thousands of instances of failing to report transactions through its ATMs and allegedly breaching money laundering and terrorism-financing laws.
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Commonwealth Bank of Australia Ltd. (CBA.AU) made the admission in response to a lawsuit launched last Thursday by the country's financial-intelligence agency that alleged the bank failed to provide 53,506 reports on transactions over a 10,000 Australian dollars (US$7,929) threshold over almost three years from November 2012. The Australian Transaction Reports and Analysis Centre also claimed Commonwealth Bank failed to report suspicious transactions on time or at all on transactions totalling more than A$77 million, and even after it became aware of suspected money laundering it didn't monitor customers to manage the risks.
The allegations relate to the use of the bank's "intelligent deposit machines," a type of ATM that allows anonymous deposits of up to A$20,000 in cash at a time to be automatically credited to accounts. The agency, known as Austrac, accused the bank of not carrying out any assessment of money laundering and terrorism financing risks before the machines were rolled out in 2012.
In a statement, Commonwealth Bank said the issue began in late 2012 after an unrelated software update to the machines, when a coding error occurred that meant the machines didn't create the threshold transaction reports needed. It said the error became apparent in 2015, and Austrac was notified within a month of being discovered and the missing reports were provided and the coding error fixed.
Commonwealth Bank said the vast majority of the reporting failures alleged by the agency, about 53,000, relate specifically to the coding error. It added it recognized that other serious allegations were also made by Austrac.
"In an organization as large as Commonwealth Bank, mistakes can be made. We know that because we are a big organization, these mistakes can have significant impact," the bank said.
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The bank said that it planned to file a defense statement and didn't intend to litigate the matter publicly, but commented on the allegations due a desire for more information by its people, shareholders, customers and the community.
Austrac described Commonwealth Bank's breaches as serious and systemic noncompliance.
In the suit filed with the federal court in Sydney, Austrac described several alleged money laundering syndicates, including about A$20.6 million deposited into 30 Commonwealth Bank machines between late 2014 and August 2015, including into 29 accounts in fake names. Most of the money was transferred offshore, it said in the document.
The agency also alleged Commonwealth Bank accounts were used for "cuckoo smurfing," a form of money laundering involving transferred between associates in different countries in such a way that money doesn't cross borders. It said that in May 2015, two people were arrested a charged for money laundering offenses, allegedly using deposits made into Commonwealth Bank accounts that police in New South Wales state said involved about A$1.8 million.
Delayed reporting hindered law enforcement and resulted in lost intelligence and evidence, further money laundering and proceeds from crimes including drug dealing being lost, Austrac alleged.
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(END) Dow Jones Newswires
August 06, 2017 20:40 ET (00:40 GMT)