The Commonwealth Bank of Australia, the nation's largest bank, said on Monday it had agreed to pay a 700 million Australian dollar ($531 million) fine for failing to comply with measures to prevent money laundering and terrorism financing.
The bank negotiated the fine with the Australian Transaction Reports and Analysis Center, the government's financial intelligence agency better known as AUSTRAC, to resolve a civil Federal Court case that began in August. The agreement is subject to court approval.
The bank has also agreed to pay AUSTRAC's AU$2.5 million legal costs.
The bank admitted that it was late in reporting more than 53,500 suspicious transactions exceeding AU$10,000 between 2012 and 2015. Each offense was punishable by a fine of up to AU$21 million.
The bank blamed a single software error in its deposit-taking automated teller machines and argued those violations should be treated as one rather than as a series of individual offenses.
The suspicious transactions were conducted by people connected to the international drug trade and the bank suspected some transactions may have been associated with terrorism financing.
Matt Comyn, who became the bank's chief executive officer in April, said in a statement that court approval of the agreement would bring certainty to one of the most significant issues the bank faced.
"While not deliberate, we fully appreciate the seriousness of the mistakes we made. Our agreement today is a clear acknowledgement of our failures and is an important step towards moving the bank forward. On behalf of Commonwealth Bank, I apologize to the community for letting them down," Comyn said.
The statement added that it would work closely with AUSTRAC on a constructive approach to combating financial crime and protecting the integrity of the financial system.
The government welcomed the agreement.
Home Affairs Minister Peter Dutton said the bank's disregard for its obligations allowed criminals to exploit its systems and put the Australian community at risk.
Treasurer Scott Morrison said that the Australian public expected the financial sector to better protect itself from exploitation by criminals and individuals associated with terrorist groups.
"Complying with the law is non-negotiable, especially when it comes to our largest financial institutions that Australians rely on for their homes and businesses and the Government is serious about enforcing any breaches," Morrison said.