CBA admits disparate data contributed to anti-money laundering contravention
The Commonwealth Bank of Australia (CBA) has filed its defence in response to the civil proceedings commenced by the Australian Transaction Reports and Analysis Centre (Austrac), admitting that disparate datasets contributed to a contravention of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.
Under Section 82(1) of the Act, CBA is required to identify, mitigate, and manage the risk a reporting entity may reasonably face that might involve or facilitate money laundering or the financing of terrorism if it has adopted a standard anti-money laundering and counter-terrorism financing program.
"CBA admits that at various times between about 20 October 2012 and 12 October 2015, due to an error in the process of merging data from two systems, its account level automated transaction monitoring did not operate as intended in respect of 778,370 accounts," the bank wrote in its claim.
"CBA admits that this deficiency in its automated transaction monitoring over that period constituted a contravention of s82(1) of the Act."
Part A of the Act also requires the bank to undertake risk assessments of the inherent risk that new products and services -- including new channels and technologies for delivering those products and services -- might involve or facilitate money laundering or terrorism financing, and keep those risk assessments up to date.
The bank said it has had, at all relevant times, a financial crime platform for undertaking automated transaction monitoring and a system for manual alerts to be raised and transmitted to CBA's Pegasus Financial Crimes Case Management System, delivered by software giant Pegasystems.
In a statement issued to the Australian Securities Exchange (ASX) on Wednesday evening, CBA said that since it was first made aware of the discrepancies in 2015, it launched an upgraded financial crime technology platform used to monitor accounts and transactions for suspicious activity.
It said it is also adding new controls, such as using "enhanced digital electronic customer verification" processes to supplement face-to-face identification, in an attempt to reduce the risk of document fraud.
It was alleged by Australia's financial intelligence and regulatory agency in August that CBA had been involved in "serious and systemic non-compliance" with the Act, originally detailing 53,700 alleged breaches, 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.
The bank said that in September 2015, its automated process was corrected so that TTRs were generated for transactions identified by the relevant transaction code.
However, between November 2012 and September 2015, the automated process did not generate TTRs for 53,506 deposits of AU$10,000 or more through IDMs.
In its defence, CBA has asked Austrac to treat the contraventions as one course of conduct, arguing that the reports were late due to one systems-related error.
The bank faces a maximum penalty of AU$18 million for each of the contraventions if found guilty.
The bank's CEO Ian Narev will depart the bank in mid-2018 as a result of the Austrac proceedings.
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