Introduction
Money laundering is increasingly becoming a major challenge worldwide. The issue has become rampant with the involvement of banks. The proliferation of the vice has continued eluding stakeholders, calling to question whether penalties applied for money laundering are severe enough, or whether the financial reward accrued from criminal activities outweighs the risk of punishment. Such is the case with the Commonwealth Bank of Australia (CBA). This essay seeks to establish whether the punishment accorded for its involvement in money laundering was sufficient to prevent future involvement.
ANL/CTF and FTR Acts
The Australian Transaction Reports and Analysis Centre (AUSTRAC) is Australia’s intelligence agency charged with regulating anti-money laundering and counter-terrorism financing (AML/CTF). AML/CTF law requires that businesses provide AUSTRAC with financial transaction reports and suspicious matters, which it analyses, and, together with other government agencies, counter financial crimes. According to the 1998 Financial Transaction Reports (FTR) Act, all Australian cash dealers need to make Threshold Transaction Reports (TTRs) of cash transactions of A$ 10000 and more to AUTRAC, and other suspicious transactions. Dealers must also authenticate accounts.
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CBA Involvement
CBA’s Intelligent Deposit Machines (IDMs) allowed anonymous large deposits and immediate transfer to other accounts, with no limit to customer transactions per day.Despite the stipulations of the Act and AUSTRAC, CBA allowed customers to operate accounts under pseudo names. Customers made structured deposits of slightly under the A$ 10000 threshold to avoid detection. In so doing, the CBA facilitated money laundering by syndicates dealing with drugs and firearms between 2015 and 2018.CBA failed to deliver to AUSTRAC its IDM TTRs worth more than A$625 million, also failing to properly monitor more than seven hundred thousand accounts under its AML/CTF program. Additionally, CBA failed in risk management of its IDMs.
Punishment
In 2018, the bank was fined by AUSTRAC A$700 million for violating AML/CTF laws and an additional A$ 2.5 million as legal fees. CBA was also required to maintain A$ 1 billion reserve capital until the government proved its capacity to prevent future violations. An additional A$ 200 million in reserve for compliance with banking financial services royal commission, with an extra A$100m for its AMF/CTF improvements. As a consequence, CBA replaced its top level management.
Ethical Consideration
By facilitating laundering by drug syndicates, CBA not only posed threat to national security, it also risked genuine customers’ investment. As a moral entity, therefore, CBA completely failed to meet its ethical duty. Further, by failing to honor its legal obligations, CBA ignored its fiduciary duty to its clients.
Was punishment sufficient?
No arrests were made of anyone at CBA, nor was there a criminal trial. While the fine was the largest in Australian AML/CTF laws violationshistory, itnevertheless was a minor issue for the bank, translating to a mere six-day revenue or 0.07% of its total assets. Therefore, the punishment for deliberate financial crimes while facilitating terrorism activity is very light, given that no employee or manager was arrested in connection with the issue (DeRoma, 2018).
Conclusion
From similar cases globally, it is common for money laundering banks to be handed light punishments, a precedent that encourages future violations. It is clear that these punishments are light enough that bankscan risk the consequences, as they enjoy the benefits from involvement in illegal activity.
Recommendations
It is recommended that tougher punishments be put in place to prevent future recurrences. Additionally, management should be held accountable, to ensure that flimsy excuses are not used as defense. Individuals, be it employees or management should be arrested and criminally prosecuted to decrease the incidences.
References
DeRoma, P. (2018). Commonwealth Bank of Australia Money Laundering Case. Retrieved from: https://sevenpillarsinstitute.org/commonwealth-bank-of-australia-money-laundering-case/
