AUSTRAC class action against CBA dismissed

Charges against the Commonwealth Bank of Australia (CBA) in relation to alleged failure to keep shareholders informed regarding its non-compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act) have been dismissed by the Federal Court.

In 2017, the Australian Transaction Reports and Analysis Centre (AUSTRAC) initiated civil penalty proceedings in the Federal Court against CBA for “serious and systemic non-compliance” with anti-money laundering and counter-terrorism laws.

The action from AUSTRAC alleged that CBA had more than 53,700 contraventions of the AML/CTF Act after an investigation conducted by AUSTRAC into the major bank’s compliance, regarding its use of intelligent deposit machines (IDMs) in particular.

Furthermore, AUSTRAC alleged that CBA did not comply with the requirements of its AML/CTF program in relation to monitoring transactions on 778,370 accounts over a period of three years.

The major bank denied 89 of 100 allegations relating to AML/CTF breaches in 2018, however, admitted it was late in filing 53,506 threshold transaction reports.

CBA paid a $700 million penalty in 2018 in order to settle the matter with AUSTRAC.

The class action was filed on 9 October 2017 by Maurice Blackburn Lawyers on behalf of all shareholders affected by the alleged non-disclosure by CBA and was supported by Omni Bridgeway.

In 2020, the Australian Securities and Investment Commission (ASIC) told the major bank that it will not be taking any action in relation to the proceedings.

Justice David Yates handed down the judgment on the morning of Friday (10 May), dismissing the charges against CBA.

In the summary of Zonia Holdings Pty Ltd v Commonwealth Bank of Australia Limited (No 5) [2024] FCA 447, Justice Yates stated that he is satisfied that CBA was “constructively aware of the IDM ML/TF Risk Assessment Non-Compliance Information pleaded as the August 2015 IDM ML/TF Risk Assessment Non-Compliance Information”.

Speaking on the allegations, Justice Yates said: “These conclusions and findings mean that the applicants have not established that the Bank contravened s 674(2) of the Corporations Act.

“As to the applicants’ case on misleading or deceptive conduct, I am not satisfied that the Bank made the Compliance Representations or the Continuous Disclosure Representation.

“Even if I had found that the Bank had made the Continuous Disclosure Representation, the applicants’ case on misleading or deceptive conduct, based on that representation, lies in establishing that the Bank failed to comply with its continuous disclosure obligations. As I have said, the applicants have not established the latter case.”

Following the dismissal of proceedings, Justice Yates handed down the following two orders:

(a) Limiting, for a relatively short period, the publication of the full reasons for judgment to only the parties and their legal advisers and not to any other person.

(b) Providing the parties with the opportunity to bring in agreed orders, and agreed answers to the common questions, to enable the proceedings to be finalised.

Reasons for the judgment are set to be published on 15 May 2024.

More to come…

[RELATED: CBA won’t see enforcement action in AUSTRAC case]