Finance Finance News ‘Temper your sense of justice’: CBA chief to subordinate who questioned the business

‘Temper your sense of justice’: CBA chief to subordinate who questioned the business

cba banking inquiry
Commonwealth Bank CEO Matt Comyn leaves the banking royal commission after nearly two days of evidence. Photo: AAP
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Former Commonwealth Bank chief Ian Narev told current CEO Matt Comyn to “temper your sense of justice” in 2015 when Mr Comyn suggested the bank get out of dodgy credit insurance operations, the financial services royal commission has heard.

The bank also failed to understand its legal obligations in the scandal involving customer use of intelligent deposit machines, despite associated breaches eventually costing it $700 million in penalties, Mr Comyn told the inquiry in his second day of giving evidence.

CBA failed to adequately deal with IDM transactions that were subject to money laundering and terrorism reporting regulations from 2012 until November 2017.

“CBA did not understand or meet obligations under the legislation. We didn’t understand the risks,” Mr Comyn told the commission on Tuesday.

Counsel assisting Rowena Orr QC. asked him how the situation came about: “How could it be that an organisation of CBA’s size and sophistication did not understand its legal obligations?”

Mr Comyn was unable to provide a satisfactory answer and Ms Orr observed that from May 2012 to November 2017 “CBA failed to conduct appropriate money laundering and terrorism” risk assessments.

Two transactions of $20,000 eventually triggered the concern of money-laundering tracking agency Austrac, which asked CBA about them.

In June this year, the Commonwealth Bank agreed to pay $700 million plus legal costs after Austrac accused it of serious and systemic failures to report suspicious deposits, transfers and accounts. It is the largest civil penalty in Australian corporate history.

As part of the settlement, CBA admitted to the late filing of 53,506 reports of transactions of $10,000 or more through its IDMs.

Mr Comyn also said that CBA had not acted appropriately in its dealings with the Australian Securities and Investments Commission on the issue of credit card insurance. The bank’s approach to the regulator was at times “problematic and poor” and “narrow and legalistic”,’ he said.

CommBank took more than two years to notify ASIC of legal breaches of credit insurance. The issue was reported only when the bank learned it would be featured in the media.

Mr Comyn said he had discussed the credit insurance issues with Mr Narev in 2015 and suggested to his predecessor that it was not worth the trouble it caused.

“I just did not think it was worth it, in any sense,” he told the commission. “Obviously for customers, but from a commercial perspective. Why would we risk it?”

In response, Mr Narev – who disagreed with Mr Comyn’s view – told Mr Comyn to “temper your sense of justice”.

Also on Tuesday, Commissioner Kenneth Hayne further examined CBA’s fee-for-no-service scandals, which involved account management fees being charged without a service being provided and without the client having a dedicated adviser.

Commissioner Hayne observed that, in such cases, there was no payment to an adviser, to which Mr Comyn agreed.

 “What happens to the money. It goes to the entity?”, the commissioner asked.

“That’s right,” Mr Comyn replied

Commissioner Hayne: “Well, that must have been apparent within the entity?”

“I agree,” Mr Comyn said.

“Did anybody grapple at that time with whether that was something that should have been done to take the money to the entity’s benefit?”

The bank appeared to happily take the money without considering the implications.

“I’m not aware of the extent to which they grappled with it,” Mr Comyn said.