Commonwealth Bank: Coding error behind money-laundering suit

Bloomberg

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 August 3 by the country’s financial crime agency. Austrac alleged the bank failed to report on time or at all suspicious transactions totaling more than A$624 million ($497 million). The bank also failed to monitor suspected money laundering even after being alerted by law enforcement agencies, Austrac claimed.
“In an organisation as large as Commonwealth Bank, mistakes can be made,’’ the lender said in a statement on Monday. A software update to the bank’s automated cash-deposit machines in late 2012 introduced a “coding error’’ which meant the machines didn’t 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 the approximately 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 Austrac 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, ranging from giving poor advice to wealth-management customers to allegations the nation’s three other biggest banks manipulated a benchmark swap rate. The opposition Labour party has jumped on the money laundering claims to bolster its calls for a far-reaching inquiry into the banks.

‘Scandals, Rip-Offs’
“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,’’ Katy Gallagher, Labor’s spokeswoman for financial services, 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.
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 on August 9, when it’s forecast to report a record annual profit of A$9.8 billion, according to 12 analysts surveyed by Bloomberg.