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Corporate watchdog investigates if Commonwealth Bank broke disclosure laws Corporate watchdog investigates if Commonwealth Bank broke disclosure laws
(7 months later)
Australia’s corporate watchdog is investigating whether the country’s biggest bank broke disclosure laws by not telling investors about problems with money laundering by criminal gangs and suspected terrorists.Australia’s corporate watchdog is investigating whether the country’s biggest bank broke disclosure laws by not telling investors about problems with money laundering by criminal gangs and suspected terrorists.
The Australian Securities and Investments Commission chairman, Greg Medcraft, told MPs on Friday that the investigation would determine whether the Commonwealth Bank met its licensing obligations to “act efficiently, honestly and fairly” in revealing potential costs to the bank.The Australian Securities and Investments Commission chairman, Greg Medcraft, told MPs on Friday that the investigation would determine whether the Commonwealth Bank met its licensing obligations to “act efficiently, honestly and fairly” in revealing potential costs to the bank.
Commonwealth Bank CEO confident internal warnings not 'wilfully ignored'Commonwealth Bank CEO confident internal warnings not 'wilfully ignored'
Speaking atthe same parliamentary committee hearings in Sydney, the Reserve Bank governor, Philip Lowe, said that the banking sector in general had “strained” public trust with its pursuit of profit over customer service.Speaking atthe same parliamentary committee hearings in Sydney, the Reserve Bank governor, Philip Lowe, said that the banking sector in general had “strained” public trust with its pursuit of profit over customer service.
The problem of criminal gangs exploiting a lack of safeguards around “intelligent deposit machines” to launder tens of millions of dollars was raised at Commonwealth’s highest levels around August 2015.The problem of criminal gangs exploiting a lack of safeguards around “intelligent deposit machines” to launder tens of millions of dollars was raised at Commonwealth’s highest levels around August 2015.
But the first investors knew of it was when a federal court lawsuit dropped last week alleging “systemic and serious” violations of anti-money laundering and counter-terrorism funding laws since 2012.But the first investors knew of it was when a federal court lawsuit dropped last week alleging “systemic and serious” violations of anti-money laundering and counter-terrorism funding laws since 2012.
The lawsuit by Austrac, the financial intelligence agency, could become the most expensive in Australian corporate history.The lawsuit by Austrac, the financial intelligence agency, could become the most expensive in Australian corporate history.
Austrac secured the largest fine against the gambling company Tabcorp in March over 108 breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act.Austrac secured the largest fine against the gambling company Tabcorp in March over 108 breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act.
The Commonwealth Bank is accused of more than 43,700 breaches of the same laws, raising the unlikley possibility of a maximum fine of $9.66bn, almost as much as its record $9.88bn net cash profit last financial year.The Commonwealth Bank is accused of more than 43,700 breaches of the same laws, raising the unlikley possibility of a maximum fine of $9.66bn, almost as much as its record $9.88bn net cash profit last financial year.
The Commonwealth’s chief executive, Ian Narev, Australia’s highest paid bank boss with $12.3m in 2015-16, has defended the lack of disclosure to investors. He did not believe that a costly lawsuit would follow.The Commonwealth’s chief executive, Ian Narev, Australia’s highest paid bank boss with $12.3m in 2015-16, has defended the lack of disclosure to investors. He did not believe that a costly lawsuit would follow.
Medcraft said that Asic would examine whether the bank’s officers and directors met their disclosure duties under the Corporations Act.Medcraft said that Asic would examine whether the bank’s officers and directors met their disclosure duties under the Corporations Act.
“I wanted to inform the committee that ASIC has commenced inquiries into this matter and any consequences this matter has for the laws we administer,” he said.“I wanted to inform the committee that ASIC has commenced inquiries into this matter and any consequences this matter has for the laws we administer,” he said.
Medcraft said companies did not have to tell Asic about breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act.Medcraft said companies did not have to tell Asic about breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act.
But directors needed to “bring professional scepticism in exercising their role” to make sure risks were managed, he said.But directors needed to “bring professional scepticism in exercising their role” to make sure risks were managed, he said.
Lowe told the parliamentary house economics committee that it was “fair to say that trust in banking has been strained” and that service had taken a back seat to sales in the industry.Lowe told the parliamentary house economics committee that it was “fair to say that trust in banking has been strained” and that service had taken a back seat to sales in the industry.
While generally managing risks satisfactorily, there were examples of this being neglected because of a desire for short-term profit, Lowe said.While generally managing risks satisfactorily, there were examples of this being neglected because of a desire for short-term profit, Lowe said.
Narev suggested on Wednesday the bank hierarchy had no reason to believe it could face major penalties when in 2015, it disclosed more than 43,000 late reports of big transactions to Austrac.Narev suggested on Wednesday the bank hierarchy had no reason to believe it could face major penalties when in 2015, it disclosed more than 43,000 late reports of big transactions to Austrac.
That came amid alleged delays or a failure to act on police requests to stop suspicious overseas transfers, and for information, which led to an Australian federal police raid of the bank’s premises in Perth over a $315m methamphetamine investigation.That came amid alleged delays or a failure to act on police requests to stop suspicious overseas transfers, and for information, which led to an Australian federal police raid of the bank’s premises in Perth over a $315m methamphetamine investigation.
Narev said notices from regulators were “normally a very specific request for a piece of information” and the bank reported about 4m suspicious transactions to Austrac a year.Narev said notices from regulators were “normally a very specific request for a piece of information” and the bank reported about 4m suspicious transactions to Austrac a year.
“When you get these sorts of notices from Austrac, they are not against any expressed view of what they’re going to be used for and what the outcome might come for,” Narev said.“When you get these sorts of notices from Austrac, they are not against any expressed view of what they’re going to be used for and what the outcome might come for,” Narev said.
“We do what we always do in these situations, is exercise judgment as to what requires disclosure against pretty well-established principles about what requires disclosure, and our view would be that these things didn’t come anywhere near it in the form they came at the time.”“We do what we always do in these situations, is exercise judgment as to what requires disclosure against pretty well-established principles about what requires disclosure, and our view would be that these things didn’t come anywhere near it in the form they came at the time.”
Narev was also asked asked whether the bank’s alleged delays or lack of action on suspected criminal cashflows despite requests from the Australian federal police and others were due to its interest in collecting fees from more than $8bn that went through its machines.Narev was also asked asked whether the bank’s alleged delays or lack of action on suspected criminal cashflows despite requests from the Australian federal police and others were due to its interest in collecting fees from more than $8bn that went through its machines.
He said there were “no economic reasons that would underpin the alleged activity and that’s not part of the equation”.He said there were “no economic reasons that would underpin the alleged activity and that’s not part of the equation”.
On Thursday the federal treasurer, Scott Morrison, condemned the bank’s “epic fail” over the money laundering allegations after taking advice from Asic and the banks’ watchdog, the Australian Prudential Regulation Authority.On Thursday the federal treasurer, Scott Morrison, condemned the bank’s “epic fail” over the money laundering allegations after taking advice from Asic and the banks’ watchdog, the Australian Prudential Regulation Authority.
Morrison told ABC radio on Thursday there were “very troubling” issues of culture and governance at the bank. It previously had to pay out tens of millions to compensate customers for poor financial advice, and was tarnished by revelations of profit-driven denials of life insurance claims.Morrison told ABC radio on Thursday there were “very troubling” issues of culture and governance at the bank. It previously had to pay out tens of millions to compensate customers for poor financial advice, and was tarnished by revelations of profit-driven denials of life insurance claims.
BankingBanking
BankingBanking
Business (Australia) Business
Australian economyAustralian economy
Commonwealth BankCommonwealth Bank
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