ANZ bank claims compliance amid Austrac's Commonwealth Bank probe

ANZ has said it is compliant with anti-money laundering regulation following Austrac commencing civil penalty proceedings with the Commonwealth Bank of Australia.

The Australia and New Zealand Banking Corporation (ANZ) has commented on the state of its smart ATMs and anti-money laundering systems following civil penalty proceedings initiated by the Australian Transaction Reports and Analysis Centre (Austrac) against the Commonwealth Bank of Australia (CBA).

ANZ on Wednesday said it has systems in place to ensure it complies with anti-money laundering obligations, including processes to monitor and report suspicious activity. The bank noted also that it is subject to continuous supervision from Austrac and has no outstanding requirements from the financial intelligence and regulatory agency, refuting reports that allege otherwise.

"ANZ also complies with its obligation to conduct thorough 'know your customer' checks and to report all overseas funds transfers to Austrac," the bank said in a statement. "ANZ is not aware of any regulatory investigations into ANZ's AML compliance in Australia or overseas."

The bank said Austrac reviewed its ATMs and intelligent deposit machines in late 2015 and advised ANZ in February 2017 that it found no evidence of non-compliance with anti-money laundering regulation.

ANZ also undertook a risk assessment prior to the introduction of smart ATMs in 2013, which the bank said saw deposits limited to AU$5,000.

"We understand our role in keeping the Australian financial system safe. We have systems in place, including training for every staff member, to ensure we comply with our anti-money laundering and counter terrorism financing obligations," ANZ chief risk officer Nigel Williams said.

"We strongly support Austrac's role in disrupting serious financial crime and will continue to meet our obligations to monitor and report suspicious activity to Austrac and the Australian Federal Police."

Austrac alleged that CBA has been involved in "serious and systemic non-compliance" with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, and detailed 53,700 breaches of the Act, which included failing to hand 53,506 threshold transaction reports (TTRs) for cash transactions over AU$10,000 to Austrac through intelligent deposit machines (IDMs) for almost three years between November 2012 and September 2015.

In a response issued on Monday morning, Commonwealth Bank claimed that much of the blame for the lack of filing was due to a "coding error".

"The issue began after an unrelated software update to the IDMs in late 2012," the bank said. "Following the software update, a coding error occurred which meant the IDMs did not create the TTRs needed. This error became apparent in 2015 and within a month of discovering it, we notified Austrac, delivered the missing TTRs, and fixed the coding issue.

"The vast majority of the reporting failures alleged in the statement of claim (approximately 53,000) relate specifically to this coding error. We recognise that there are other serious allegations in the claim unrelated to the TTRs."

Austrac said the late TTRs counted for 95 percent of threshold transactions across the period in question, and have a total value of AU$624.7 million.

Beyond the TTR claim, Austrac has alleged that for three years, CBA did not comply with its anti-money laundering and counter-terrorism financing program on 778,370 accounts; that the bank failed to report "suspicious matters" on time, or at all, on AU$77 million worth of transactions; and that after becoming aware of laundering, it did not monitor the ongoing risk of doing business with the customers involved.

After delivering CBA's 2017 financial results -- and a record AU$9.88 billion in profit -- on Wednesday morning, CEO Ian Narev took to social media to share a video statement on the Austrac proceedings.

"It's been a tough time at the Commonwealth Bank since the Austrac proceedings were filed and we're taking them very seriously. We're looking through it very diligently, we've spent a lot of time on it at Commonwealth Bank board over the last couple of days," the CEO said.

"We know that we've made mistakes, we have fixed a lot of those mistakes, and will continue to look to make our business better and better."

In a statement, CBA claimed it has made significant progress on a program of action relating to its obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act, which included upgrading the financial crime technology used to monitor accounts and transactions for suspicious activity.

According to the bank, its new technology will be fully delivered over the next year at a cost of approximately AU$40 million.

It is also commencing the upgrade of additional fraud monitoring technology, spending AU$85 million on a specialised "hub" relating to its know your customer processes, and is looking to recruit more than 50 financial crime compliance professionals.

CBA's board has also established a sub-committee of four directors that will oversee the response to Austrac's statement of claim and the ongoing execution of the bank's compliance.

Narev and the other group executives received no short-term variable remuneration for the 2017 financial year, and similarly non-executive directors of CBA have had their fees reduced by 20 percent for FY18.

The bank faces a maximum penalty of AU$18 million for each of the 53,700 contraventions if found guilty.

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