Federal Bank of Australia admits money laundering scandal! More than six hundred thousand customers, eight hundred thousand shareholders and 51800 employees rely on the business and reputation of Australia`s largest bank, Federal Bank. But this morning, everyone was disappointed.
In August 2017, the Federal Bank was sued by AUSTRAC, Australia`s intelligence and financial agency, alleging that it had not reported 53506 transactions that should have been reported.
Banks are required to have more than A $10, 000 in business and need to report to AUSTRAC within 10 business days.
How did Commonwealth Bank, the Commonwealth Bank of Australia, get involved in money laundering?
Let`s give an example:
In 2015, three men laundered millions of Australian dollars through federal banks to Hong Kong.
They opened accounts in 11 federal bank stores under a driver`s license under 11 different names, while the three deposited all Australian dollars into the 11 accounts through 427 transfers and then transferred the money to Hong Kong`s accounts through 99 separate transfers.
But if any of the banks check it out, the pictures of the 11 short-term large remittance accounts are all the same!
The man, Kha Weng Foong, was convicted late last year of involvement in money laundering. He sent about $4.5 million to Hong Kong through federal banks in the five weeks of 2015.
Two of his associates, Foong and Fung, were captured by the Australian Federal Police in August 2015. They were caught with more than $ two hundred thousand in cash and more than 16 different identities.
The Australian federal police believe this is just the tip of the iceberg in money laundering.
Australia`s money-laundering watchdog said: this is not a financial planning scandal and the money is likely to be used by terrorists. Depositors` money has become the cornerstone of crime, and the federal bank earns a lot of service fees from it.
The Federal Bank`s (IDMs), a smart deposit machine launched in 2012, can trade a limit of $20000 a time, with no limit on the number of transactions a day.
The Australian Securities and Exchange Commission said federal banks` money-laundering destinations could be domestic or international, while none of the businesses with more than $10000 in (IDMs) via intelligent depositors had been reported. Of these deposits, more than A $10000 were deposited through IDMs, with more than 53000 deposits. In May and June 2016 alone, more than 1 billion cash was deposited through CBA`s IDM. CBA did not report these deposit records to the Australian transaction reporting and Analysis Center (AUSTRAC).
The Australian government said the federal bank had not taken any steps before the risk assessment, and that all the money it had passed through the federal bank over the past three years might have funded terrorists and jeopardized local security.
Before the risk assessment survey, the amount traded through the federal bank`s self-service cash machine was about $8.9 billion.
The AUSTRAC requires federal banks to pay fees for more than 53000 illegal transactions, with a maximum fine of A $18 million per transaction, totaling hundreds of billions of Australian dollars in fines.
In an explanation to the AUSTRAC, the Federal Bank said all of these so-called violations can be blamed on a problem because they are caused by a system error in the same code. So the fine is also dealt with according to one violation.
The two types of fines are very different because the maximum penalty for a single violation is A $18 million, while the 53000 fines are likely to empty the bank. It can be said that the future of the Federal Bank is in the final decision on the manner in which to fine.
CEO Ian Narve, the federal bank, said 53700 allegations were exaggerated and that coding errors in these IDM systems had been notified to the AUSTRAC in 2015 and asked to be corrected.
But under intense pressure in the course of the scandal investigation, Ian Narve announced that it would resign by July 2018.
After a full year of investigation, the Federal Bank today admitted 53506 violations and further violated regulatory rules. Eventually, the Federal Bank agreed to pay A $700 million to quell the scandal.
The fine also includes a $2.5 million legal fee for the federal bank, which needs to be approved by a federal court.
The $700m fine exceeds the A $375 million federal bank set aside for the lawsuit when it announced its first-half results in February, but is below last year`s most exaggerated analyst forecast of more than A $1 billion.
The Ian Narve position was taken over by Matt Comyn in April 2018.
Current Federal Bank Chief Executive Matt Comyn said the bank had not deliberately violated the law and failed to notify regulators of possible suspicious transactions in a timely manner, but admitted that the bank`s risk procedures and due diligence did not meet the requirements.
"although we didn`t mean to do this, we fully understand the seriousness of our mistakes," Matt Comyn said in a statement on Monday.
"the agreement we reached today clearly acknowledges our failure, but it is an important step forward for the Federal Bank."
The Federal Bank will include a provision of A $700 million in its annual results for the year ending June 30, which will be announced on August 8.
In recent years, banks have been seen to be losing credibility in society, and the federal bank`s money-laundering scandal has put customers and shareholders on the other side.
Although not directly involved in money laundering, but the bank shareholders have made money.
Depositors` money can be lost or even used in terrorist organizations.
That is why the Royal Commission has become increasingly vocal about its involvement in the banking system, with the hope that banks will be regulated by more institutions.
