Fortunately the legal services board was reported to US law enforcement and "the FBI jumped out of the bushes", says accountants for the legal services board who kept US law enforcement up to date as US investigations unfolded.
From Bankstown to Beirut, CBA’s money laundering spans crime, terror
Commonwealth Bank’s smart ATMs were used by money launderers.
Commonwealth Bank’s smart ATMs were used by money launderers.
11:00PM December 15, 2017
From a Vietnamese restaurant in Sydney’s Bankstown to a bank branch in Beirut, new allegations by financial intelligence agency Austrac link Commonwealth Bank to the top-tier of organised crime here and globetrotting suspected terrorists overseas.
Australia’s biggest bank spent yesterday desperately trying to downplay the extent of Austrac’s latest accusations — little wonder, given a fine of more than $1 billion looms large.
But with international authorities intensely focused on countering the flow of money to terrorists, there’s little chance the case will escape the attention of offshore regulators.
Implosion has nation turning left
Acting in part on intelligence from police, Austrac on Thursday added another 100 breaches of anti-money-laundering and counter-terrorism financing laws to the 53,700 it first laid against the bank in August.
The regulator detailed three new case studies — one from WA and two from NSW — and additional allegations about the bank’s intelligent deposit machines, which have proved a honey pot for money launderers.
CBA has attempted in recent days to stress the work that goes into its compliance with anti-money-laundering requirements. It said that since 2012 it had reviewed around 160,000 surveillance alerts and submitted more than 36,000 suspicious matter reports to the regulator.
But its efforts appear to be in vain, with Austrac alleging the bank is still breaching the law.
One of the new case studies appears to match up with allegations made in a joint NSW Police and Australian Criminal Intelligence Commission investigation into drug and gun-running in Sydney. According to police, by following the money investigators were able to seize kilos of cocaine and ice, about 1000 ecstasy tablets, seven illegal guns and millions of dollars.
The ring was allegedly run by Thi Lan Phuong Pham, who police arrested at Sydney Airport in January as she waited for a plane to Vietnam.
Austrac alleges a “drugs and firearms syndicate” used a money laundering group run by “Person 81” — who NSW Police confirm is Pham — to launder a whopping $42 million in just six months between March and August last year.
Her “money mules” allegedly deposited the ill-gotten gains into CBA accounts, frequently in amounts less than the $10,000 threshold where the bank automatically reports transactions to Austrac.
But CBA knew there was a problem anyway, because NSW Police served the bank with a demand to produce documents relating to one of the mules on April 24.
This should have triggered a suspicious matter report to Austrac, but, the regulator claims, “at no time has CommBank given the Austrac CEO an SMR in relation to the matters pleaded”.
Another case studies appears to match the circumstances of a Lebanese-Australian man who ran into trouble with authorities in Lebanon in 2004 for alleged “involvement with the al-Qaeda organisation”, and “planning terrorist acts in Lebanon and abroad and creating a network for that purpose”.
Austrac alleges CBA was too slow to tell it about attempts by the man to transfer money to his bank account in Beirut.
The man and a Jordanian-born Australian, who at the time was wanted by NSW Police for allegedly shooting up the Lakemba police station, were jailed in Lebanon in 2005. (The Jordanian-born man was cleared of the shooting in 2013.)
The transfers were repeatedly foiled by CBA, although one tranche of $5000 made its way all the way to Lebanon before the bank managed to retrieve it.
Risks involved in transferring money to Lebanon have been well understood since at least 2014, when Austrac warned that it and other countries in the region were “used as conduits to route money destined for terrorist groups in Syria”.
“These jurisdictions are targeted due to the comparative stability of their financial sectors and because funds sent to these countries are less likely to attract attention than those sent directly to Syria,” Austrac said in a report.
The global peak body that sets AML-CTF standards, the Financial Action Task Force, has also been red hot on Islamic State, issuing a blizzard of reports explaining how the terror group gets its money and asking national authorities to tighten controls.
As part of Austrac’s expanded suite of allegations against CBA, the regulator also claims six further breaches of the bank’s responsibilities in carrying out risk assessments of its intelligent deposit machines. Section 82 of the anti-money- laundering law requires banks to comply with several ongoing risk assessment and review processes, such as considering Austrac guidance and feedback along with significant instances of laundering and terrorism financing.
In its amended statement of claim, Austrac said contravention of this part of the law was “ongoing”. A spokeswoman for the regulator alleged to The Weekend Australian on Thursday — and again yesterday — the bank was still contravening the law.
As recently as October CBA’s chief executive Ian Narev, defended the lack of a daily deposit limit on the bank’s smart ATM network.
The chief executives of National Australia Bank, Westpac and ANZ, who were also appearing for one of their twice-yearly parliamentary grillings, told MPs they introduced limits of between $4000 and $5000 on their intelligent deposit machines after conducting thorough risk assessments.
Mr Narev said CBA had a “technical limit of $20,000 per transaction” due to the ability to deposit 200 notes in a machine at a time. The bank’s higher threshold on the limit was based on “utility, particularly for our small-business customers”, Mr Narev said.
But in late November, CBA introduced a $20,000 “daily” deposit limit for customers using their personal cards at its ATMs.
“We undertook a new risk assessment in relation to IDMs in October 2017 and introduced further controls in November 2017,” CBA said in a statement issued yesterday, claiming there were “some misleading media reports” relating to Austrac’s amended claims.
“We will now carefully consider the amended claim,” it said.
“The appropriate time to respond to the allegations will be when we file an amended defence.”
Share this article
The administrator has disabled public write access.
Mcgarvie 'spies' on Royal Commission groups?
1 month 4 weeks ago #4044
Sep 16 2018 at 11:00 PM
Updated Sep 16 2018 at 11:00 PM
My Saved Articles Print License article
Banks face years of litigation, billions in costs after Hayne
Share via Email
Share on Google Plus
Post on facebook wall
Share on twitter
Post to Linkedin
Share on Reddit
The major banks could be caught up in a decade of litigation to mop up the royal commission – especially if property ...
The major banks could be caught up in a decade of litigation to mop up the royal commission – especially if property markets turn further south.Pedestrian , man with grey suit Photographic
by Angus Grigg James Eyers Edmund Tadros
The major banks face years of rolling litigation and potentially billions of dollars in additional compensation out of the Hayne royal commission, as plaintiff law firms prepare a series of test cases over mortgage lending practices and regulators target other areas of bad behaviour.
In moves set to further shift the lending dynamic from "buyer beware" to "seller beware", Maurice Blackburn is preparing to sue the banks over interest-only lending, mortgage fraud and how household expenses were calculated prior to approving loans.
Targeting the $1.7 trillion Australian mortgage market would be a major escalation from current legal skirmishes around fees and conflicts of interest in corporate superannuation. But any attack over bank home lending practices will be fiercely defended, prolonging cases over many years, investors said.
And while the commission has not yet handed its interim report to the federal government, and relatively few borrowers have lost money due to the strong property market, investors worry that costly litigation could drag on for years irrespective of who is to blame when loans go bad.
Maurice Blackburn partner Josh Mennen is planning some test cases against the banks to determine if they lent ...
Maurice Blackburn partner Josh Mennen is planning some test cases against the banks to determine if they lent irresponsibly in mortgage markets. Louie Douvis
"The banks would want to make sure no one ends up proving that they have been irresponsibly lending... because that opens up a can of worms," said Omkar Joshi, a portfolio manager at Regal Funds Management.
CWLTH BANK FPO (CBA)
volume 2833016value 202400437.1
Last updated: Mon Sep 17 2018 - 07:23:35
View full quote
3/8/18 Revised Group Securities Trading Policy
3/8/18 Becoming a substantial holder for ASL
2/8/18 Change in substantial holding for SEH
31/7/18 Change in substantial holding for DCN
26/7/18 Ceasing to be a substantial holder for GTY
View all announcements
He said the legal road ahead for the banks reminded him of the payment-protection insurance scandal in the UK, which dragged on for more than a decade and ended up costing the British banks £40 billion.
Lloyds, the largest British bank, initially set aside £3.2 billion for its role in the scandal, a sum which has grown to £18 billion ($39 billion) over the last seven years.
"The misconduct focus from the royal commission is not too dissimilar from the experience in the UK following PPI," said Ibon Garcia, a partner at consulting firm Oliver Wyman.
Investors Mutual portfolio manager Hugh Giddy: "To say this will all blow over quickly is a best-case scenario."
Investors Mutual portfolio manager Hugh Giddy: "To say this will all blow over quickly is a best-case scenario." Zak Kaczmarek
He said the onus in the industry had changed from one where it was no longer "buyer beware" but "seller beware".
The potential for a rapid escalation in compensation payouts and litigation involving mortgage cases would not only be costly for the banks, but make it more difficult to restore community trust in a hostile political and regulatory environment.
"I think home lending is the big sleeper issue out of the royal commission," said Josh Mennen, who runs Maurice Blackburn's financial services practice. He has seen a spike in inquiries from borrowers suffering mortgage stress from one a fortnight to around five a day.
The firm's test cases, which could be filed before the end of the year, will target the falsification of assets by banks and brokers selling mortgages, the use of the so-called Household Expenditure Measure (HEM) to determine if borrowers can repay a loan, and the provision of interest-only home loans. Investment bank UBS estimates one-in-three customers don't know their loan is on interest-only terms.
The new legal claims, which will require property markets to fall further before big losses are claimed, could be brought under provisions of the National Consumer Credit Protection Act. Other claims could target uncompetitive life insurance, after the commission exposed misconduct by retail funds directly selling life products, Mr Mennen said.
Rival plaintiff law firm Slater & Gordon initiated the first of many likely class actions last week. It said it would pursue AMP for inappropriately charging fees on superannuation accounts, and the Commonwealth Bank for paying uncompetitive interest rates to its super fund members. Slater's put the initial damages estimate at $500 million and said it could target the other banks with similar claims.
Unlike most class actions, which typically represent shareholders unhappy with corporate performance, it the litigants would be borrowers who have lost money.
The Australian Securities and Investments Commission has sued two of NAB's wealth management entities for charging superannuation clients fees for services that were not provided, alleging wrongdoing in relation to $100 million in fees deducted from the accounts of hundreds of thousands of members.
ASIC has estimated that the costs to the industry of the fee for no service scandal could exceed $1 billion. But this figure is likely to grow as the banks and insurance companies face rolling litigation on multiple fronts.
Most profitable business
The banks are each spending around $50 million this year to defend themselves before the royal commission. Any compensation around life insurance and superannuation could be dwarfed by mortgage lending claims, which are the banks' largest and most profitable business.
Investors Mutual portfolio manager Hugh Giddy said he is concerned new cases could uncover more systemic issues than the royal commission has so far identified.
"The banks have definitely lent money to people who can't afford to borrow," he said.
Mr Giddy said this was driven by brokers being rewarded for writing larger loans because they were paid on commission.
"There are lots of conflicts of interest that are questionable," he said.
Earlier this month, Westpac settled a case brought by ASIC, agreeing it had breached responsible lending laws between 2011 and 2015 when its home loan approval system automatically approved more than 10,000 loans.
ASIC is continuing to investigate banks and non-bank lenders for further breaches of responsible lending laws, with more cases planned over the next four months.
Banks could also face regulatory litigation from the Australian Prudential Regulation Authority (APRA), which has new powers under the Banking Executive Accountability Regime (BEAR) to bring legal action against banks and fine them if executives fail to meet strict new duties.
While lending problems are well known, the banks have been shielded from compensation claims up until now by low interest rates and rising property prices. This has meant few borrowers have sustained claimable losses.
But in recent months the Australian property market has turned, with prices over the last year in Sydney falling 5.6 per cent and 1.7 per cent in Melbourne, according to research firm CoreLogic. At the same time ANZ, Westpac and Commonwealth have raised rates on their standard variable loans by as much as 16 basis points.
"It is highly fortuitous for banks that questionable behaviour is coming into the spotlight when most people haven't lost any money," Mr Giddy said.
"But that doesn't mean the banks are home and hosed – because our property market is starting to fall. If it falls more, maybe more people will be losing money and arguing they shouldn't have borrowed so much. I would not say the banks are in the clear.
"To say this will all blow over quickly is a best-case scenario. That's what worries me: that these issues could go on for a while in coming to the surface and being complained about."
UBS research estimates around $500 billion in home loans have been written based on incorrect declarations around income, assets and existing debts.
Mr Joshi said years of legal cases would be a distraction to bank management and restrict their ability to deliver for customers and shareholders. "That's not a good thing. But the whole regulatory landscape has been going that way for a number of years now. We have seen a lot of this offshore, and now a lot more of it is coming through in Australia now," he said.
Mr Giddy said a flurry of legal cases "would make me as an investor demand a higher risk premium, or more conservative view of the likely earnings trajectory for the banks, which is already under headwinds from not being able to pump out interest only loans and higher funding costs."
If the market sinks further and losses are sustained, it could potentially allow Maurice Blackburn and other plaintiff firms to argue contracts are invalid and to seek compensation for any losses from a forced sale, or interest payments in excess of those borrowers should have paid if they received a loan within their means.
The royal commission could also tie up the banks in claims through the government's new ombudsman scheme, the Australian Financial Complaints Authority, which has authority to hear complaints regarding matters of up to $1 million in value and order compensation of up to $500,000.
The administrator has disabled public write access.