The Australian Transaction Reports and Analysis Centre (AUSTRAC) has given the Commonwealth Bank of Australia (CBA) a record fine of $700 million Australian dollars ($534 million USD) for disregarding laws preventing money laundering and terrorism financing.
AUSTRAC started legal action against CBA in August 2017 after an investigation discovered CBA’s non-compliance with anti-money laundering (AML) and counter terrorism financing (CFT) regulations, specifically found in the bank’s use of intelligent deposit machines (IDMs) and their failure to report suspicious transactions in a timely manner due to a coding error. AUSTRAC stated that during 2012 to 2015, CBA failed to report 53,000 suspicious transactions through its ATMs, allowing drug gangs to launder large sums of money through anonymous deposits straight to the bank’s accounts.
After settling in court, Matt Comyn, CEO of CBA issued an apology stating, “While not deliberate, we fully appreciate the seriousness of the mistakes we make. Our agreement today is a clear acknowledgement of our failures and is an important step towards moving the bank forward. I apologize to the community for letting them down.”
However, while AUSTRAC is likely making an example of CBA by demanding such a large fine, the sheer amount of the fine is not enough to deter other banks from following in CBA’s footsteps but may instead lead to harming innocent customers and shareholders because it is the shareholders, not the CBA employees who made the mistakes in the first place, that pay the fine. The cost of enhancing compliance and security will also trickle down to customers through higher fees and charges which can hinder services and lower profits. While the high fine can be beneficial for political posturing, it cannot prevent the incident from recurring unless employees who are found responsible for the violations be penalized and fined as well.
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