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Issue #1790      August 16, 2017


You can bank on it

On August 3, the financial intelligence agency AUSTRAC announced that it was taking the Commonwealth Bank (CBA) to court for 53,700 breaches of money laundering and counter-terrorism financing laws. In the documents lodged with the Federal Court, AUSTRAC alleges that the CBA failed to act on suspicions that drug syndicates were using its network of Intelligent Deposit Machines (IDMs) to launder tens of millions of dollars.

A number of mind-boggling allegations were made in the document lodged by AUSTRAC (Australian Transaction Reports and Analysis Centre) in the Federal Court, including serious allegations that CommBank’s conduct “has exposed the Australian community to serious and ongoing financial crime”. AUSTRAC is seeking civil penalty orders against the CBA which could potentially run into billions of dollars if found guilty of all the breaches and the Court had the will to impose such fines.

Facilitating anonymity

Banks and other financial institutions are required by law to report cash transactions of $10,000 or more – referred to as threshold transactions – and any suspicious transactions to AUSTRAC. Suspicious transactions could, for example, be a large number of deposits just below the threshold.

CommBank IDMs can accept deposits by cash or cheques and up to 200 notes at a time – i.e. a limit of $20,000 per cash transaction. There is no limit on the number of such deposits in a day. The cash is deposited into a CommBank account using a card from any financial institution and being cash is credited instantly.

If the card was not issued by CommBank, then the cardholder’s details are not known to CommBank. There is no legal requirement for banks to report depositor’s details for threshold transaction reports for deposits made through an IDM – only the recipients of these deposits.

This cash can immediately be transferred to other domestic or offshore accounts thus facilitating anonymous transfers of very large sums. Other banks have IDMs but with a limit of $5,000 per transaction.

There was exponential growth in the use of IDMs. In the first six months of their roll-out in 2012, $89.1 million was deposited in CommBank’s IDMs. In the first six months of 2016, cash deposits grew to $5.81 billion, with over $1 billion in each of May and June.

Such large sums should have raised suspicions.

Alleged breach of procedures

According to AUSTRAC’s court filing, the CommBank has a Joint Anti-Money Laundering and Counter-Terrorism Financing Program as required by law but it did not comply with a number of procedures under that program.

Amongst these, AUSTRAC alleges that CommBank did not carry out a Money Laundering/Terrorism Financing (ML/TF) risk assessment prior to the launch of the IDMs or in response “to the exponential rise in cash deposits through IDMs.”

CommBank, like other institutions, is required to report threshold ($10,000 or more) and suspicious transactions within 10 business days of the transaction being made.

AUSTRAC alleges that 53,506 of such transactions processed through IDMs from November 5, 2012 to September 1, 2015 were reported late – two on August 24, 2015 and the remaining 53,504 on September 24, 2015.

Of these late notifications, it is alleged that 1,640, totalling $17.3 million, were related to transactions connected with money laundering syndicates being investigated and prosecuted by the Australian Federal Police (AFP) or accounts connected with those investigations.

Even more incredibly, according to AUSTRAC’s allegations, the bank failed to act after suspected money laundering was brought to its attention by the AFP or through its own internal analysis.

AUSTRAC presents the court with details of the operations of four money-laundering syndicates where it alleges CommBank has failed to report suspicious activities. In some instances convictions have already been obtained.

To give a few examples of the allegations against CommBank regarding money laundering syndicates:

“By April 2015, CommBank had identified repeated, suspicious and connected patterns of structured cash deposits followed by international money transfers of 16 of these accounts (15 of which were in fake names). Not withstanding this suspicion, between April and 1 July 2015, CommBank permitted approximately $9.1 million to be transferred from these accounts to Hong Kong.”

In another case, where the deposits were the proceeds of drug manufacture and importation, and one person has already been convicted and two others charged, AUSTRAC says:

“Despite cash deposits under $10,000 being made into this account, no transaction monitoring alerts for structuring were ever raised. Very large cash deposits, up to $532,500 were also regularly being made at branches. Some alerts were raised for these large deposits, but were not reviewed in a timely manner, having regard to the ML/TF risks. By no later than 28 April 2015, CommBank considered the account to be high risk and suspicious. By this time, $14.7 million had already been sent offshore. However, CommBank did not monitor this customer having regard to the ML/TF risks and permitted the highly suspicious activity to continue, with $12.2 million in cash deposits received and $11.8 million remitted overseas after 28 April 2015 ...”

AUSTRAC alleges a number of breaches of different sections of the Act in seeking a monetary penalty.

AUSTRAC alleges that by the bank’s failure to report on time or at all in accordance with the Act, AUSTRAC and other law enforcement agencies have been deprived of information, delays have resulted in lost intelligence and evidence (including CCTV footage), further money laundering and lost proceeds of crime.

Financial penalty inadequate

For years now Australia’s major banks and other financial institutions have been riddled with what seems a never-ending list of scandals involving hundreds of millions of dollars and untold suffering and hardship for their victims.

This latest in a litany of fraud and corruption allegations and failings of the financial system to act responsibly and according to the law has rocked the banking industry to its foundations and reinforced demands for a royal commission into the banking sector.

Tens or maybe even hundreds of millions of dollars were allegedly laundered over a period of several years through Australia’s largest and most profitable financial institution. Even when it was reported to the bank that its intelligent deposit machines were being used as conduits for this money, no action was taken.

The privatisation and deregulation of the Commonwealth Bank, which once operated under a social charter, has resulted in a monolithic and powerful financial institution driven by one motive – profit. And if facilitating money laundering adds to profits and draws customers away from other banks, so be it.

Very few heads have rolled. Perhaps a token financial planner or two, a lower level manager has taken the rap. The culture of profit first, second and always has not been challenged.

We can only hope that the Australian Federal Police are investigating the those behind the inaction and those with ultimate responsibility who always hide behind the veil of ignorance.

The case being taken to the Federal Court by AUSTRAC accuses an institution, not those at the helm, let alone the parasitic nature of the finance sector or corrupt nature of the system we live under – capitalism.

Bring on the Royal Commission!

Next article – Editorial – Hands off DPRK and Venezuela!

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