Commonwealth Bank of Australia (CBA)

Commonwealth Bank of Australia (CBA)

(CBA1) 4 June 2018

An agreement was reached between AUSTRAC and the CBA for a $700 million penalty to resolve Federal Court proceedings relating to CBA’s serious breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act).

In reaching the agreement (subsequently approved by the Federal Court), CBA admitted that it contravened the AML/CTF Act Anti-Money Laundering on 53,750 occasions.

In summary, CBA admitted that it failed to:

1. Carry out an appropriate assessment of the money laundering and terrorism financing risks of its IDMs prior to October 2017.
2. Complete the introduction of appropriate controls to mitigate and manage the risks of IDMs prior to April 2018. 
3. Provide 53,506 threshold transaction reports to AUSTRAC on time for cash transactions of $10,000 or more through IDMs from November 2012 to September 2015, having a total value of about $625 million for a period of three years.
4. Comply with the requirements of its AML/CTF program relating to monitoring transactions on 778,370 accounts.
5. Report suspicious matters on time, or at all, involving transactions in the tens of millions of dollars even after it became aware of suspected money laundering or structuring on CBA accounts.
6. Monitor its customers to mitigate and manage ML/TF risk, including the ongoing risks of doing business with those customers.

Penalties:
$700 million penalty ordered by the Court by agreement between AUSTRAC and CBA.

Attachments: 
(CBA1) 20180604 [Austrac Media Release – CBA ($700m Penalty)]

(CBA2) 5 June 2020

The Federal Court of Australia ordered CBA to pay a $5 million penalty after the Court found that CBA had breached the ASIC Act and Corporations Act for failures of their AgriAdvantage Plus Package (AA+ Package). The Court also ordered CBA to publish a Corrective Notice in the form determined by the Court.

From May 2005 to December 2015, CBA sold customers the AA+ Package, which entitled them to benefits in the form of fee waivers, interest rate discounts and bonus interest on savings, in exchange for the payment of package fees on 22 CBA products.

ASIC alleged, and CBA admitted, that: 

1. Contrary to the terms of the AA+ Package, CBA did not provide certain benefits to customers and, as a result, customers were overcharged fees and interest on loans and fees, and underpaid interest on savings. CBA also overcharged AA+ Package fees to certain customers.
2. The causes of CBA’s failures included the highly manual nature of CBA’s systems by which the AA+ Package benefits were applied as well as CBA having no systems or processes in place to check whether customers were receiving benefits.

A total of 8,659 customers were impacted by CBA’s conduct on 131,542 occasions, in circumstances where CBA benefited from a total of $8,087,276.23 in incorrectly charged fees and interest on loans, and underpaid interest on savings.

This conduct was the subject of the Financial Services Royal Commission (Final Report 1 February 2019).

Penalties:
$5 million penalty ordered by the Court.

Attachments:
(CBA2) 20200605 [ASIC Media Release – CBA (Overcharging $5m Penalty)]
(CBA2) ASIC v Commonwealth Bank [2020] FCA 790 (Overcharging $5m Penalty)

(CBA3) 7 April 2021

The Federal Court of Australia ordered CBA to pay a $7 million penalty after the Court had previously declared that CBA made false or misleading representations and engaged in misleading and deceptive conduct.

These declarations related to 12,119 occasions when CBA charged a rate of interest on business overdraft accounts substantially higher than what its customers had been advised.

ASIC alleged, and CBA admitted, that from 1 December 2014 to 31 March 2018, CBA:

1. Provided customers with terms and conditions for certain credit facilities that stated an interest rate to be charged or that had been charged (in most cases, 16% per annum).
2. Sent periodic account statements to customers referencing the rate at which interest rate was being charged (in most cases, 16% per annum). 
3. Charged more than 1,510 customers a different, higher interest rate on their overdraft accounts (in most cases approximately 34% per annum).

This conduct was the subject of the Financial Services Royal Commission (Final Report 1 February 2019).

Penalties:
$7 million penalty ordered by the Court.

Attachments: 
(CBA3) 20210407 [ASIC Media Release v CBA (Overcharging Interest $7m Penalty)]
(CBA3) ASIC v Commonwealth Bank [2021] FCA 423 (False & Misleading $7m Penalty)

(CBA4) 19 October 2021

The Federal Court ordered Colonial First State Investments Limited (Colonial), owned by CBA until 1 December 2021, to pay a penalty of $20 million for misleading communications with members.

The Court noted this to be a substantial penalty for serious contraventions of the law. The Court previously declared Colonial had breached the ASIC Act and Corporations Act when communicating to members on at least 12,978 occasions.

The misleading or deceptive conduct by Colonial included: 

1. Telling its members that legislative changes required Colonial to contact them and obtain an investment direction to stay in the FirstChoice Fund when that was not the case.
2. Failing to tell members that if Colonial did not receive an investment direction from the member, it was required to transfer the member’s superannuation contributions into a MySuper product.

 The Court found that the misleading communication was intended to encourage members to stay with the FirstChoice Fund rather than move to the MySuper product.

This conduct was the subject of the Financial Services Royal Commission (Final Report 1 February 2019).

Penalties:
$20 million penalty ordered by the Court.

Attachments: 
(CBA4) 20210924 ASIC V Colonial First State (CBA) (Agreed Statement of Facts)
(CBA4) 20211019 [ASIC Media Release v Colonial First State (CBA) (False & Misleading Super Funds $20m Penalty)]
(CBA4) ASIC v Colonial First State (CBA) [2021] FCA 1268 (False & Misleading Super Funds $20m Penalty)

(CBA5) 29 October 2021

CBA pleaded guilty to 30 criminal charges of making false or misleading representations to 165 customers when selling consumer credit insurance.

The 30 criminal offences relate to CBA’s supply of CreditCard Plus and Loan Protection policies as an add-on insurance product sold in branches, by telephone and online.

Between 2011 and 2015, CBA made false or misleading representations to customers that they could make a claim against their insurance policies when some or all these claims were not available to them.

This conduct was the subject of the Financial Services Royal Commission (Final Report 1 February 2019).

Penalties:
CBA remediated nearly $250 million to impacted customers.
Court to determine the criminal penalties.

Attachments:
(CBA5) 20210916 [CBA Media Release – ASIC (Criminal Pleads Guilty 30 Offences)]
(CBA5) 20211029 [ASIC Media Release – CBA (Criminal Pleads Guilty 30 Offences)]

(CBA6) 15 June 2022

Avanteos Investments Limited, a former subsidiary of the CBA, has been convicted and penalised a total of $1,710,000 by the County Court of Victoria for failing to update defective disclosure statements.

The defective disclosure related to the charging of fees to superannuation members after their death, when it was known that Avanteos, which traded as Colonial First State Custom Solutions, did not have lawful authority to do so.

As a result of the offending, 499 deceased members with funds in Avanteos superannuation products were charged almost $700,000 in fees by Avanteos when it was not entitled to do so. Avanteos has remediated all affected customers’ estates.

This conduct was the subject of the Financial Services Royal Commission (Final Report 1 February 2019).

Penalties:
$1,710,000 penalty ordered by the Court.

Attachments:
(CBA6) 20220615 [ASIC Media Release v Avanteos Invest (CBA) (Criminal Charging Deceased Members Penalty $1.71m)]
(CBA6) R v Avanteos Investments (CBA) [2022] VCC 869 (Criminal Charges)