Commonwealth Bank of Australia (CBA) Money Laundering Scandal

Money-Laundering: A Case study of the CBA Money Laundering Scandal
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Money-Laundering: A Case study of the Commonwealth Bank of Australia (CBA) Money Laundering Scandal
1 Description of the issue and events that led to losses
In 2018, the Commonwealth Bank of Australia (CBA) settled its proceedings with AUSTRAC over allegations of money laundering for over $700m, a figure that was about twice its earlier estimates of around $375m. The bank also made its admission of its inadequate risk management processes to avert money laundering issues and a breach of the Anti-Money Laundering and Counter-Terrorism Act of 2006 (AML-CTF) (Thomson & Frost, 2018). For instance, for a duration of three years, the bank failed to monitor more than 778,370 accounts as per the requirements of the AML-CTF Act and did not file 53,506 suspicious matter reports for amounts worth $10,000 or over $625 million (Jordana, 2018). Besides, CBA also failed to report extra transactions of tens of millions of dollars in a timely manner and also failed to examine customers’ accounts even after noting signs of money laundering (Thomson & Frost, 2018). The settlement of $702.5m was the largest civil penalty approved by the Federal Court in Australian history. In August 2007, AUSTRAC had taken the bank to court over claims that criminals and terrorists had exploited its intelligent deposit machines (IDMs) and in 2018, CBA admitted that it had filed 53,506 transactions and149 suspicious reports late and had inadequate risk assessment of the IDMs (Thomson & Frost, 2018). CBA’s chief executive, Matt Comyn lamented the seriousness of the matter and admitted the failures of the bank as Nicole Rose, the chief executive of AUSTRAC added that the fine was a signal of the seriousness of non-compliance with the AML-CTF Act, which is not tolerable.
1 Consequences to the company
CBA admitted to committing serious mistakes in its anti-money laundering and risk management processes and changed its senior leadership in key roles such as overseeing the financial crimes compliance backed by the significant resources and robust accountabilities. The change of employees that were directly involved in the scandal was a move to avert further issues with the challenges of money laundering. Following the announcement of the settlement of the penalty of $702.5m, the bank’s share price went from a low of $68.70 to $70.23, which is a 2.2% rise (Hutchens, 2018). However, on the side of regulators, this event also attracted stringent measures for banks to protect the Australian community from risks, according to Peter Dutton, the home affairs minister. The scandal resulted in CBA losing its 100 year-reputation which could affect its operation if it was not resolved urgently (West, 2017). Scott Morrison, the treasurer, also added that law was non-negotiable, particularly when it came to the largest financial institutions in the country. Morrison added that the government was keen on enforcing all breaches and that the bank management should ensure that their systems are not compromised by terrorists an...