This week, the Commonwealth Bank of Australia has settled with AUSTRAC (Australia’s Federal Financial Intelligence Agency) to pay over $700 million in fines and legal fees. The fines are a result of AUSTRAC’s investigation of the Commonwealth Bank’s breaches of the Anti-money laundering and Counter-Terrorism Act. The investigation revealed what Treasurer Scott Morrison believes are ‘egregious errors’ over the past three years.
Hot on the heels of the current Royal Commission investigating Australian banking practices, the Commonwealth Bank has been slammed with charges of serious misconduct, in many aspects of its conduct including its management of customer money, corporate culture and now, its serious breaches of counter-terrorism law.
Public opinion of Australian banks and their banking practices are currently at a low point. The Banking Royal Commission has blown their world wide open and exposed significant issues that are at the heart of corporate banking culture. Despite the shock and surprise of some of the Royal Commission’s public revelations, many people perceive banks as embodiments of greed and corporate apathy to the plight of regular people.
Last week’s investigations revealed how Australian banks did not provide enough assistance when financing small businesses. Banks will need to review due diligence procedures as a result. Further, adding further insult to injury, last weeks’ investigations from the AUSTRAC and Royal Commission revealed that the Commonwealth Bank had erroneously sent over 10,000 emails containing erroneous customer data to the wrong email addresses.
When you’ve been discovered to have been taking money from the accounts of deceased individuals or accidentally losing customer data; breaching the Anti-Money Laundering and Counter-Terrorism Act for the past three years is just another facet of an already gigantic iceberg.
Some of AUSTRAC’s investigations revealed that:
- The CBA failed to report suspicious transactions that breached the act, and when it did so, it reported it late;
- The CBA failed to carry proper risk assessments and audits of its ATM system to investigate suspicious deposits of money; and
- The CBA had discovered accounts that were engaging in suspicious activity and failed to monitor or follow them up.
The list of offences is longer than this article can afford to enumerate. It is enough to know, however, that these offences were not always accidents or one-off mishaps, but part of a wider negligent corporate culture. As a result, millions of dollars have been laundered, financing terrorist operations and numerous national and international drug cartels.
The cause of many of these offences lies in Australia’s banking structure and corporate culture. As long as the banks make the money, a blind eye can be cast over oversight and accountability. Vigilance is always important. And the higher the stakes (or the greater the money) it should be followed that greater security policy is implemented.
How can the banks foster vigilance and better security policy? Below are three practical processes that could not only assist in improving policy but also improve their corporate culture:
- Security and finance as a unified practice – rather than assigning risk assessment and the enforcement of security to a specialist team or department, implement a strong risk assessing culture to all levels of the company. All staff should be trained to identify suspicious behaviour and know how to act upon it immediately, rather than report it to the relevant person when things go wrong.
- Focus on automated technology to assist in reporting – use technology to your advantage. Aside from developing applications and software that can assist your customer s with their finances – create robust technology that can detect, report and act upon possible serious breaches of security without relying on human attention to follow through.
- Foster a stronger humanist culture – very few people understand the impact of money laundering and the funding of terrorist activities. It is important that provide a good education to all staff about the implication of these things. By doing so you foster a corporate culture that believes in doing the right thing not just for financial gain, but because it understands the consequences when it doesn’t.