Financial intelligence agency AUSTRAC has confirmed that a small number of transactions by customers of the Commonwealth Bank of Australia using the bank's "intelligent deposit machines" were assessed as having potential links to terrorism or terrorism financing.
AUSTRAC acting CEO Peter Clark was before the Senate legal and constitutional affairs committee hearing on Friday in his first public appearance since the agency launched Federal Court action against CBA.
The agency says the bank failed to report on more than 53,000 transactions over $10,000 by its customers as required by law. Some of these were linked to drug trafficking, the proceeds of crime and terrorism. He confirmed that each of the transactions was subject to an $18 million fine, contrary to CBA claims they would be liable for only one $18 million penalty.
Mr Clark told the committee that six suspect cash transactions by five CBA customers, which were not properly reported, could have terrorism links.
This is at odds with CBA CEO Ian Narev who has strongly denied any transactions were linked with terrorism. Mr Narev said last week that he had "no evidence as yet that the CBA has assisted in the funding of terrorism". Mr Narev said the bank would be looking at each of AUSTRAC's claims in its court action "very closely".
Mr Clark said the agency had not identified similar breaches of the money laundering reporting requirements by the other major banks.
"We have looked at the other banks, in particular, and we have not identified the same issues with the other banks," he said.
Mr Clark told the committee that AUSTRAC had a lot of contact with CBA about money laundering risks before commencing civil penalty proceedings against the bank in the Federal Court.
When asked by the Senate committee whether the court prosecution was the "last option", Mr Clark said the agency had a range of enforcement options that do not involve going to the court, including getting an enforceable undertaking from the bank.
"It's not something we take lightly...particularly when it's of a serious nature a lot of careful consideration goes in before filing civil penalty proceedings," Mr Clark said.
Mr Narev said last week that AUSTRAC had to issue legal proceedings in order to secure a penalty.
When asked by independent senator Derryn Hinch about the market speculation CBA could face "hundreds of billions of dollars" in penalty, Mr Clark said it was up to the Federal Court to decide, which will take into account the size of the transactions and the number of contraventions by CBA.
CBA is arguing that is should be liable for a single contravention of the Anti-Money Laundering and Counter-Terrorism Financing Act because it is blaming the money laundering scandal on a single computer coding error, which it says prevented it from reporting transaction over $10,000.
However, Mr Clark said that each of the 53,000 contraventions carried a maximum penalty of $18 million.
Mr Clark said the agency first became aware of the money laundering issues at CBA in August 2015.
He also said the timing of the announcement of the money laundering scandal - a day or two before the bank was due to announce its full year result – was a "coincidence".
"We filed our matter in the Federal Court when we felt we had sufficient information at hand to do that and in a position to satisfy the court. That was the only consideration," he said, before adding there was no consultation with the government about the timing of the announcement.
