As the hours count down to its annual profit result, Australia’s biggest bank is trying to avert a financial catastrophe by blaming a software glitch for most of its alleged money-laundering breaches.
A federal watchdog alleges the Commonwealth Bank failed to report 53,506 instances of suspiciously large amounts of cash deposited through its ATM deposit machines. The maximum fine nears $1 trillion.
In response, CBA issued two statements on Monday, both provided to The New Daily, that characterised all 53,506 of these allegations as the result of a single faulty software update in late 2012.
“This error became apparent in 2015 and within a month of discovering it, we notified AUSTRAC, delivered the missing [reports of suspicious transactions] and fixed the coding issue,” the bank said.
The CEO and chair will face intense public scrutiny when they hand down the bank’s annual report on Wednesday, as it is expected to contain a billion-dollar profit and millions in executive pay.
The argument CBA has adopted will be crucial as the bank faces an $18 million penalty for each of the ‘failure to report’ allegations, totalling a maximum of $963 billion.
If CBA can successfully argue those breaches were the result of a single error, it could reduce its total liability for them to $18 million at most.
The bank said as much on Monday: “These alleged contraventions could be considered to arise from a single course of conduct to the extent that they emanated from the same systems error.”
However, this defence would not fully extinguish the bank’s liability, as it faces approximately 200 other allegations.
The bank admitted this, saying: “There are other serious allegations in the claim.”
It offered no public defence to these remaining claims, saying instead that “mistakes can be made”.
Crucially, CBA did not address allegations that it ignored warnings from the federal police in 2015 that its accounts were being used by crime gangs to launder dirty money.
Last week, AUSTRAC, the anti-money laundering agency, alleged that: “Even after CBA became aware of suspected money laundering or structuring on CBA accounts, it did not monitor its customers to mitigate and manage [money laundering and terrorism financing] risk, including the ongoing [money laundering and terrorism financing] risks of doing business with those customers.”
Eleven criminals from at least four organised crime gangs have been convicted of using the bank to launder illicit cash.
AUSTRAC also alleged the bank did not assess the ATM deposit machines used by criminals to launder money for potential risks until three years after they were installed.
CBA also failed to monitor transactions on 778,370 accounts, and failed to report $77 million worth of suspicious transactions on time or at all, the regulator alleged.