Australia's Commonwealth Bank Accused of Massive Money-Laundering Breaches

Commonwealth Bank Sued Over Alleged 53,700 Laundering Breaches
A Commonwealth Bank of Australia branch stands in Sydney, Australia, on Thursday, Aug. 3, 2017. Commonwealth Bank, Australia's largest lender, has been sued by the government's financial crime agency over 53,700 alleged breaches of money laundering and terrorism financing laws.Brendon Thorne / Bloomberg via Getty Images

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/ Source: Reuters

SYDNEY — The Australian government on Thursday accused the country's biggest mortgage lender, Commonwealth Bank of Australia, of widespread breaches of money-laundering and counter-terrorism financing rules.

Financial intelligence agency AUSTRAC said it had initiated civil penalty proceedings in the Federal Court against CommBank for "serious and systemic non-compliance," in the biggest case of its kind in Australia and the first against a major bank.

"The effect of CommBank's conduct in this matter has exposed the Australian community to serious and ongoing financial crime," AUSTRAC said in a court filing.

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Commonwealth Bank said in a statement it was reviewing the allegations and would respond "in due course."

A Commonwealth Bank of Australia branch stands in Sydney, Australia, on Thursday, Aug. 3, 2017. Brendon Thorne / Bloomberg via Getty Images

Australia's biggest mortgage lender failed to report suspicious matters "either on time or at all involving transactions totalling over AUS $77 million ($61 million)," AUSTRAC said.

The agency alleged 53,700 contraventions of the anti-money laundering and counter-terrorism financing act, particularly with regards to so-called intelligent deposit machines or IDMs.

The previous biggest such case came against Australia's top bookmaker Tabcorp Holdings, earlier this year, with only 108 alleged breaches. Tabcorp paid A$45 million in fines, the biggest civil penalty in Australian corporate history.

An AUSTRAC spokeswoman declined to comment on possible penalties facing CommBank, or whether other banks could be in the agency's firing line.

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The maximum penalty for contravening the anti-money laundering and counter terrorism financing law is AUS $18 million per breach.

Anonymous Deposits

IDMs are a type of automated teller machine that accepts deposits by both cash and check, and facilitate anonymous cash deposits.

There had been significant growth in the use of CommBank's IDMs since their rollout in May 2012, AUSTRAC said. Cash deposits in the six months to June 2016 surged to AUS $5.8 billion compared with AUS $89 million in the first six months after CommBank introduced the machines.

Cash was deposited using fake names with proceeds going to drug importation syndicates, AUSTRAC alleges in its court filings.

"Even after suspected money laundering or structuring on Commbank accounts had been brought to CommBank's attention, CommBank did not monitor its customers with a view to mitigating and managing money laundering/terrorism financing risk," the court filing shows.

CommBank accounts were also used for "cuckoo smurfing," a form of money laundering THAT involves transfers between countries without the need for money to actually cross international borders, AUSTRAC added.