As talkback presenter Alan Jones was calling for Commonwealth Bank boss Ian Narev to head the Australian Rugby Union on the basis he knows the difference between "black and red figures", the government's financial transaction regulator, Austrac, was reminding parliament about a different set of CBA-related numbers.
After batting off a series of questions from senators relating to its landmark legal action against the Commonwealth Bank, the acting boss of Austrac Peter Clark made it clear at a senate hearing on Friday he views the 53,000-plus failures in the bank's automated reporting system as individual breaches.
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This is in sharp contract to the CBA, which sees them as one breach of the law on the basis they emanated from a systems error. This interpretation puts an entirely different spin on the magnitude of penalties – and dollar figures – it could face.
One breach faces a penalty of up to $18 million, but if it's 53,000-plus breaches, we are talking potentially billions of dollars. Depending on the size of the fine, could be the difference between black and red figures.
Austrac alleges CBA breached the Anti-Money Laundering and Terrorism Funding Act by failing to report more than 50,000 deposits over a certain size in its network of more than 500 Intelligent Deposit Machines (IDMs), which it rolled out in 2012. It also alleges it failed in its obligations to monitor 778,370 accounts knowns as "affected accounts" between 2012 and 2016.
It alleges "serious and systemic non compliance," and that CBA's controls and procedures were not effective and in some cases enabled customers to be anonymous and create fake names, which enabled drug dealers, organised crime syndicates and terrorists to launder and transfer money overseas.
As Austrac's Peter Clark told parliament "these are contraventions of our act, they are civil penalty contraventions, they relate to a range of non-reporting."
He said the Federal Court takes into account a range of issues when determining a penalty, including the number of contraventions and the totality of the alleged behaviour.
![Commonwealth Bank CEO Ian Narev. AUSTRAC said it had "quite a lot of engagement" with the bank.](http://web.archive.org./web/20170821090515im_/https://www.fairfaxstatic.com.au/content/dam/images/g/x/s/o/g/f/image.related.articleLeadwide.620x349.gxzafi.png/1503122450325.jpg)
When asked by Senator Derryn Hinch to clarify the number of breaches of non reporting of transactions over $10,000, he confirmed it was more than 53,000.
Clark also confirmed that six of the late transaction reports relate to cash transactions by five customers with links to terrorism and terrorism finance. That means one customer completed two transactions, which is frightening in this era of terrorism.
But he refused to go a step further and respond to a question from Labor senator Murray Watt about whether the various examples of criminal activity, including drug and money laundering, that it had outlined in its statement of claim was exhaustive.
Questions were also batted away about who knew what and when, which is something class action lawyers, the Australian Securities and Investments Commission (ASIC) and the Federal Court will try and find out.
Six of the late transaction reports relate to cash transactions by five customers with links to terrorism and terrorism finance. That means one customer completed two transactions, which is frightening in this era of terrorism.
It goes to exactly how deep of a pickle CBA could find itself in.
Last week ASIC announced it had launched an investigation into whether officers and directors at CBA complied with their duties under the Corporations Act, whether CBA complied with its continuous disclosure obligations, whether they complied with their licensing obligations and whether they complied with their financial reporting obligations, including reporting contingent liabilities.
If the board was aware of the non-reporting in the latter half of 2015 the question of whether there was a need for a provision/contingent liability or announcement to the market will be scrutinised.
Austrac says it became aware of CBA's failure to report more than 50,000 transactions in August 2015.
At what stage Austrac escalated its business-as-usual interactions with CBA to a full investigation and warned the bank of the seriousness of its concerns, is vital in terms of continuous disclosure obligations and sound corporate governance.
Clark also refused to answer this line of questions, including whether Austrac engaged in discussions about an enforceable undertaking before taking legal action. But he did say over the past few years Austrac had "quite a lot of engagement" with CBA over these issues.
Some of the more shocking allegations relates to a notice issued by the Australian Federal Police on May 18, 2015 requesting information in respect to an account in order to proceed with an investigation relating to 16 suspicious accounts.
"No customer due diligence was carried out in response to this request," the statement says.
![](http://web.archive.org./web/20170821090515im_/http://www.smh.com.au/cqstatic/12z7v7/0408_launderng_729.jpg)
Against this backdrop, the bank went to the market and raised $5 billion in September 2015. It published an entitlement offer to investors that included a warning that one of the risks the bank had to manage was the risk to its reputation if it breached a string of things including its anti-money laundering obligations.
What it didn't say in the booklet was that it had already breached anti money laundering laws and on an eye watering scale.
It would take two more years before the breaches, along with other issues, would reach the market, damaging its reputation and its share price.
CBA, for its part, is preparing its defence. And Austrac's allegations remain just that.
But it has put everyone on high alert about the importance of abiding by the law to ensure banks don't help facilitate criminal and terrorist activities.
In this the other big four banks can breathe a sigh of relief after Clark confirmed that Austrac had looked into their monitoring of intelligent deposit machines (IDMs) and had "not identified the same issues as it had at Commonwealth Bank".
After CBA told the market that Narev will step down from the top job by the end of June 30, if not sooner, a career change to rugby union might be the ticket.
He's been an excellent chief executive when it comes to making record profits – which rugby could certainly use – and he's no stranger to controversy and scandals. He'd probably fit right in.
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