Commonwealth Bank of Australia has blamed a software coding error for more than 50,000 alleged breaches of money-laundering and terrorist-financing laws.
The error went undetected for almost three years, the Sydney-based bank said in its first detailed response after being sued on Thursday by the Australian Transaction Reports and Analysis Centre (AUSTRAC).
The nation’s financial crime agency alleged the bank failed to report on time or at all suspicious transactions totaling more than A$624 million (US$497 million). The bank also failed to monitor suspected money laundering even after being alerted by law enforcement agencies, AUSRAC said.
“In an organization as large as Commonwealth Bank, mistakes can be made,” the lender said in a statement yesterday.
A software update to the bank’s automated cash-deposit machines in late 2012 introduced a “coding error,” which meant the machines did not create the required reports.
When the error was finally discovered in 2015, the issue was fixed and AUSTRAC was alerted within a month, the lender said.
The bank said the vast majority of about 53,000 reporting failures alleged by AUSTRAC relate specifically to the coding error, though “there are other serious allegations” unrelated to the reporting requirements.
Banks are required to report to the agency any cash transactions of A$10,000 or more within 10 business days.
The allegations are the latest in a series of scandals in Australia’s banking industry — from giving poor advice to wealth-management customers to allegations the nation’s three other biggest banks manipulated a benchmark swap rate. The opposition Labor party has jumped on the money-laundering claims to bolster its calls for a far-reaching inquiry into the banks.
“The prime minister must surely accept now that the scandals, rips-offs, misconduct, unethical conduct and allegations of illegal activity just never seem to end,” Labor spokeswoman for financial services Katy Gallagher said in a statement.
Greens party Senator Peter Whish-Wilson called for the board to cancel all senior executive bonuses and to make a statement on CEO Ian Narev’s future.
“A coding error does not explain allegations about the company being slow to deal with regulator requests or explain delays in dealing with serious concerns raised by staff,” Whish-Wilson said in a statement. “If you keep denying there are cultural issues, you will never deal with them.”
Narev on Sunday said he has no intention of resigning over the issue and the case shows the “deep and strong oversight’’ the industry is under.
“I’m focused on doing my job and am not spending any time on thinking about my own position,’’ he told the Australian newspaper.
Commonwealth Bank shares rose 1 percent in Sydney trading yesterday, rebounding from biggest decline in 18 months on Friday, when they fell 3.9 percent.
The bank faces a maximum penalty of A$18 million per breach.
Gaming company Tabcorp Holdings Ltd in March agreed to pay A$45 million to settle 108 breaches of the legislation, the biggest civil corporate penalty in Australia.
The case is also set to overshadow the bank’s full-year results tomorrow, when it is forecast to report a record annual profit of A$9.8 billion, according to the median estimate of 12 analysts surveyed by Bloomberg.
AUSTRAC’s suit “raises further concerns about conduct,” Morgan Stanley analyst Richard Wiles said in a note to clients. “Potential implications include material penalties, brand damage, higher costs, management changes, adjustments to strategy, and further scrutiny from APRA, politicians and the community.”
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