CBA shares slide on alleged breaches
Commonwealth Bank has suffered a $5.5 billion slide in market value with investors ditching shares in the lender after it was accused of more than 53,000 breaches of laws put in place to combat money laundering and terrorism financing.
CBA's shares closed 3.9 per cent lower on Friday at $80.72, dragging its market value down to around $139.6 billion.
The federal government's financial intelligence unit, AUSTRAC, on Thursday launched civil proceedings in the Federal Court accusing CBA of systemic failure to comply with anti-money laundering and counter-terrorism financing laws.
"Investors have had the chance to think about the implications of these charges after little reaction to the market yesterday," CMC Markets chief strategist Ric Spooner said.
"The charges have represented an immediate and sizeable cost to the bank's shareholders."
CBA could face a maximum penalty of $18 million for each of the 53,700 contraventions, if found guilty.
Australia's largest lender denied doing anything to enable crime and said it was committed to working with law enforcement agencies, pointing out that it reports four million transactions to AUSTRAC each year.
Professor of commercial law at Melbourne university, Ian Ramsay, said that while courts generally do not go for the top end of available penalties, CBA could be at risk of massive fines.
"If the allegations are proven, I think we would expect to see a very significant penalty imposed, because they are so serious," Mr Ramsay said, adding that it was unusual there had not yet been a settlement.
AUSTRAC claims CBA failed to assess the money laundering and terrorism financing risk of intelligent deposit machines - ATMs that accept up to $20,000 per cash transaction - before rolling them out in 2012, and only took its first steps to assess those risks in mid-2015.
There has been significant growth in the use of IDMs since their roll out, with over $1 billion in cash deposited in May and June 2016 each.
AUSTRAC also alleges the bank failed to provide on-time reports of more than 53,500 transactions of $10,000 or more through IDMs, totalling $625 million.
It also accused CBA of failing to report suspicious matters involving $77 million worth of transactions, either on time or at all.
The lender on Friday said it is reviewing AUSTRAC's claim and will file a statement of defence in due course.
CBA could now face a massive reputation hit on the back of the allegations - which have already overshadowed its full-year results due out next week, Mr Ramsay said.
"It does send a message that the regulator is stepping up in terms of its enforcement actions."
Fellow lenders - Westpac, ANZ and National Australia Bank - were quick to confirm they have co-operated with AUSTRAC in order to meet obligations.
An ANZ spokesman said a recent AUSTRAC review found the bank to be compliant with all relevant anti-money laundering and counter-terrorism laws.
Westpac is also understood to have been compliant, while NAB said it works closely with AUSTRAC on intelligence and regulatory development.
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