NAB may join CBA under spotlight over money laundering, counter terrorism breaches

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Posted

November 15, 2017 18:37:17

Australia’s third-biggest bank, NAB, has said it investigating and attempting to fix a number of issues relating to money laundering and counter terrorism funding (AML/CTF) laws.

Key points:

  • NAB revealed the news on page 108 of its annual report
  • NAB said it identified “certain weaknesses with the implementation of ‘Know Your Customer’ requirements and systems
  • Rival bank CBA is facing penalties for breaching money laundering and counter terrorism funding laws

The acknowledgement buried deeply in the bank’s annual report follows explosive revelations its bigger rival CBA faced massive penalties for “serious and systematic’ breaches of AML/CTF laws.

The financial spy agency, the Australian Transactions Reports and Analysis Centre (AUSTRAC), alleged the Commonwealth Bank failed to comply with the laws on more than 53,000 occasions.

“The group is currently investigating and remediating a number of identified issues,” NAB noted on page 108 of its annual report.

The bank said it had identified “certain weaknesses with the implementation of ‘Know Your Customer’ requirements and systems and process issues that impacted transaction monitoring and reporting for some specific areas”.

“It is possible that, as the work progresses, further issues may be identified and additional strengthening may be required,” the NAB said.

“The outcomes of the investigation and remediation process for specific issues identified to date, and for any issues identified in the future, are uncertain.”

NAB said where significant AML/CTF compliance issues are identified, they are notified to AUSTRAC or equivalent foreign regulators.

“Those regulators are typically consulted and updated about progress in investigating and remediating the relevant issues,” the bank said.

NAB previously silent on issues

Last month NAB chief executive Andrew Thorburn did not mention “possible” AML/CTF issues when he fronted the House of Representatives economic committee, which was grilling bank bosses on the subject in the wake of the CBA legal action.

What is money laundering?

  • Disguising original ownership and control of proceeds of crime by making it appear to have come from a legitimate source
  • The three stages of laundering money are first introducing dirty money into a financial system, washing it, and finally reintroducing it back into the legitimate economy

Mr Thorburn told the committee that NAB took its anti-money laundering responsibilities very seriously and was committed to improving its compliance systems.

Earlier this month, NAB surprised the market by announcing a new $1.5 billion capital expenditure program on top of an existing $3 billion internal investment program.

Velocity Trade bank analyst Brett Le Mesurier said he was surprised by NAB dropping the news in its annual report.

“The bank shocked the market on results day when it unveiled the $1.5 billion program, including spending on technology to deal with AML and now we find in the annual report there are a number of ‘issues’ they are dealing with,” Mr Le Mesurier said.

“The most troubling part is the outcome is ‘uncertain’, to quote the NAB.

“We hope the uncertain outcome doesn’t result in additional costs of hundreds of millions of dollars above what has already been flagged.”

AML/CTF compliance programs are notoriously expensive with industry talk about one of the Big Four banks splashing out about $500 million earlier this decade to hurriedly head off potential problems with AUSTRAC.

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