The Commonwealth Bank of Australia: Unwitting Mule case study

In 2017 the commonwealth bank of Australia was accused of money laundering, terrorism funding and was found guilty of several financial law breaches and failing to alert authorities of suspicious activities. This event is also known as the commonwealth bank of Australia: rogue one case or commonwealth bank scandal 2017.

This sample essay will discuss the commonwealth bank of Australia: the unwitting mule case study.

Money laundering is a punishable offense in several countries of the world and is repeatedly used by terrorist organizations to receive and transfer funds for unethical and terror activity. From time to time several banks and financial organizations have been found guilty of money laundering.

Now we will look at the key player of the scandal and how the event itself came into being, what and how severe was the punishment. So let’s study the CBA money laundering scandal and see how it happened:

Main entities involved

Here we will look at the main entities involved in the scandal and a brief about their history and activities

The commonwealth bank of Australia

The commonwealth bank of Australia also known as CBA or Commbank is a Multinational organization with work of more than 51,000 people and a customer base of over 16.6 million spread across 11 nations of the world which include major countries like the United States, New Zealand, the United Kingdom, Japan and more.

The Commonwealth Bank Act was responsible for the establishment of CBA in the year of 1911 and the bank started its operations just a year later in 1912.

Initially, the bank was a fully public owned organization. However, in April 1991, the bank started the process of privatization. Till July 1966 CBA was a completely private company.

The comeback is the largest bank in Australia with total revenue of approximately 45 billion in Australian currency (Australian dollars), net profit being 9.8 billion. The total assets of the bank were 976 billion in the year 2017.

 Austrac

The Australian Transaction Reports and Analysis Centre or also termed as AUSTRAC.  It is the Australian financial agency responsible for protecting the fair nature of the Australian financial system supervision of alleged suspicious activities such as money laundering and terrorism financing activities.  They are also expected to provide their high knowledge and know how on money-laundering prevention and anti-terrorism financing.

All the businesses of Australia have to submit reports on financial transactions and suspicious matters to AUSTRAC.  The financial intelligence report compiled from data of the reports acquired by AUSTRAC and shared with other government agencies as a measure to fight suspicious activities and possible criminal activities.

The incident

Intelligent Deposit Machines

Intelligent deposit machines, which we will refer to as IDM were advanced ATM machines introduced by The commonwealth bank of Australia in the May of the year 2012.

The machine eradicated the need for human help for transferring or depositing a larger amount of cash. The machine allowed operation even when the bank was closed.

The problem

It was mentioned by AUSTRAC that the CBA’s IDMs allowed customers to deposit as many as 200 currency notes which could make a sum up to 20,000 Australian dollars.

Adding to the issue, IDMs allowed users to perform transitions anomalously and the Commbank didn’t have a limit of transition that can be performed in a day.

Money Laundering

Between that May of 2016 to June of the same more than 1 billion Australian dollars were fed to the IDMs. Many of these transitions were related to criminal activities and crime funding.

According to the Financial Transition Report Act of 1988 (Australia), all cash deals such as banks and other financial organizations have to submit a report known as Threshold transition report to AUSTRAC.

This report contains the data of transitions above the sum of 10,000 Australian dollars or any other financial activity that may be suspicious in nature.

Now we will discuss five different arrests and incidents which were related to the CBA money laundering scandal:

First

On may 21, 2015 police department of new south Wales found bank receipts at the house of the accused indicating 3 million, the majority of which were through IDMs.

The accused identified as Salman khan and Arsian shaffi were arrested. Upon future investigation, it was found that the two men used a strategy called “Structured transition” where the accused would deposit less than A 10,000 $ in order to stay out of the radar of authorities.

NSW police reached CBA for further information on the case and response from the Commbank was noted as “apathy” and “lazy”.

Second

One of the largest drug syndicates was captured with 31 kg of “methamphetamine” commonly referred to as “Ice” and 1.5 million AD in September of 2015. This was the largest drug-related bust in Western Australian history.

This particular syndicate was linked to Hong Kong was related to money laundering of a total of A 21 million $.

CBA was found responsible for failing to report the suspicious activity and their policies which allowed cash flow of such a large amount.

Third

Two men Kha Weng Fong, yues hong fung, and a third unknown individual were caught by Australian federal police on August 24 2015 after being found in possession of A720,000$ and 16 fabricated IDs.

These accused were linked to money laundering activity of 21 million in a time span of 9 months through 427 transitions using multiple accounts.

Fourth

Three unidentified individuals were arrested in January 2015.

After further investigation, it was found that the accused were responsible for money laundering activities of up to 6 million between 2014 and 2015 across 12 different accounts.

Fifth

NSW police found Mandeep Singh and one other unknown person guilty of money laundering and importing of illegal substances i.e. narcotics. They were arrested on Jan 28, 2015.

It was found that between 2014 and 2015 accused were responsible for transitions of 27 million using a single account.

Aftermath

On December 7, 2017

The House of Parliament in Australia passed the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act of 2017 which came into effect in April 2018.

The Amendment Act’s main goal was to increase the Australian government’s ability to detect, prevent and avoid illegal financial activates, which could be done by providing more authority to the AUSTRAC CEO.

Punishment

In June 2018 CBA was ordered to pay a record amount of A$700 million as it was found that Commbank was responsible for breaking over 53,700 financial regulations and law breaches and failing to report the suspicious financial activates in time shows “laziness” hence allowing the financially illegal activates to happen in the first place.

A$2.5 million of the cost of legal hearing and court process were also paid by the Commonwealth Bank of Australia.

CommBank was ordered to keep a minimum of A$1 billion in reserve capital in order to prevent similar future events to repeat. The amount has to be maintained until it is proven to government authorities that such events are traceable or if at all avoidable in the future.

Response

Launa Inman and Harrison Young, who were among the directors, left CBA in November 2017.

CBA removed four CBA directors and the CEO of CBA Ian Narev for disclosable reasons by the year 2018. Matt Comyn on April 9, 2018, become the new CEO of Commbank.

Inman and Young were members of the board’s audit committee. Independent director and chairman of the audit and risk committee Brian Long, and independent director Andrew Mohl both left the organization in 2018 after the general meeting of CBA.

Conclusion

Due to a major gap in the new intelligent deposit machines and bank policies, a lot of damage was dealt. The bank was at fault as they failed to upkeep their duty and didn’t cooperate with government authorities to help fight crime and money laundering. Hence the bank faced many charges and a heavy fine.

So how was the case study of one of the largest money laundering cases?

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