Austrac looks worse than CBA

WAS Austrac more focused on nailing the CBA’s scalp than nailing the money laundering and possible terrorism financing that was and remains the real and only really important issue?

This is the extremely disturbing question that is posed as we discover more and more about the Commonwealth Bank’s failings in regard to money laundering, and the consequent interplay between the bank and Austrac, the relevant money laundering regulator.

Austrac seems to have been far more aggressive in discharging its bank regulatory functions than working creatively, intelligently and both proactively and – even more importantly – pre-emptively with CBA to chase down money launderers and (a very tiny number of ) terrorism financiers.

Bluntly again, far better for Austrac to get front page headlines and lead network news bulletins about nailing CBA over 53,000-plus breaches than to close down money laundering behind the scenes and out of the media.

The concern starts with the way Austrac ambushed CBA with its shock disclosure late last year that it was launching civil penalty legal action against the bank.

You don’t normally ambush a partner, unless you want that partner to turn into an enemy.

More subtly and more importantly, the late ambush – well after the CBA had mended its ways – carried the very strong suggestion they weren’t working closely and co-operatively in the period.

It is critically important to emphatically restate two things. There is zero evidence and, even more importantly, zero allegation even by Austrac of active money laundering by any CBA branch, division or a single rogue staff member.

CBA’s sins are sins of omission – from (computer-driven) failure to lodge the automatic report when someone made a deposit of more than $10,000 into one of its “intelligent” ATMs, to its failure to lodge “suspicious” transaction reports, either quickly enough or repetitively enough, or to do the detailed due diligence on suspicious accounts/customers.

The second thing – without excusing CBA’s failings for an instant – goes to the number.

As CBA detailed in its amended statement of claim, over the five years under the microscope, it DID generate 160,000 automated transaction monitoring alerts; it submitted more than 36,000 suspicious matter reports and closed more than 4000 accounts.

That 36,000 number is hugely significant. Against that, Austrac is alleging CBA failed 230 times. But CBA rejects 132 of the accusations.

And in most of the rest the failing is essentially peripheral. For instance, when CBA had already identified a suspicious account and told Austrac, it then, for example, failed to lodge a further report on that account on subsequent suspicious activity.

Even the big-number failure – the 53,000-plus failed automatic ATM reports – has to be set against the 19 million reports CBA did lodge with Austrac.

You don’t have to accept the CBA side as gospel to recognise two key points.

It, the bank, got most of its obligations right.

And if preventing – and, failing that – catching money laundering and money launderers is the real objective, the regulator has more questions to answer than the accused bank.