CBA investors warned over foreign fine risk

CBA investors warned over foreign fine risk
CBA investors warned over foreign fine risk

The Commonwealth Bank of Australia risks investigations and sanctions from overseas authorities known to impose hefty fines if its anti-money laundering compliance scandal extended into foreign countries, investors have been warned.

Shares in CBA bucked the trend among other banks and fell on Friday, as it said it maintained “proactive relationships” with foreign regulators, in the wake of a media report claiming an internal review found gaps in the bank’s compliance systems within its institutional bank overseas.

The comments from CBA, and the news report of the internal review, were seen by analysts as a sign the bank is in talks with authorities overseas about anti-money laundering, which could open the door to additional action or fines.

CLSA analyst Brian Johnson told clients the situation was “clear evidence that CBA’s present AUSTRAC dispute goes well beyond the simple ‘coding error’ rhetoric from CBA”.

“It’s likely cross border, possibly in domiciles where regulators seem to extract fines of an extraordinary level,” Mr Johnson said.

Over the last month, CBA has been engulfed by Austrac’s claim the bank breached anti-money laundering rules more than 53,000 times by failing to report suspicious transactions in its ATM network, but it remains uncertain whether it may face action overseas.

Mr Johnson highlighted a case this week where New York State’s Department of Financial Services said it would seek a fine of up to US$630 million of Pakistan’s biggest bank because of “grave” anti-money laundering compliance failings.

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