ConBank becomes TerrorBank

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Oh dear, via Chanticleer:

One of the ugly sleeper issues buried in the 580-page statement of claim issued by financial intelligence agency AUSTRAC against the Commonwealth Bank of Australia is the accusation the bank failed to report its suspicions that a customer had links to terrorism financing.

Under the law any suspicion of terrorism financing must be reported to AUSTRAC within 24 hours. The only proviso is the bank must have “reasonable grounds” to form the suspicion.

This disturbing allegation about links between CBA and terrorism goes to the heart of the gaping rift in the relationship between CBA and AUSTRAC. It is an accusation that was never the subject of discussion or negotiation between the regulator and the bank prior to the court action on August 3.

…conciliatory comments are at odds with the damaging statements by AUSTRAC officials in confidential briefings about the CBA case in Canberra over the past week.

Chanticleer understands that during the briefings, AUSTRAC officials made clear their disappointment and frustration with CBA and its slack attitude to its obligations in relation to terrorism financing.

…AUSTRAC takes the view that CBA’s failure to report suspicions about terrorism financing links is a fact. CBA has, in effect, been painted as being guilty of wilful neglect in relation to its obligations in an area critical to national security.

The dirty laundry is pouring out now, via the ABC:

  • A review of superannuation payable to all employees dating back eight years. The review is on going and covers 36,000 current and former workers. The total refunds are yet to be determined, but the first $16.3 million tranche of repayments is expected to made shortly, equating to an average amount per employee of approximately $463 plus interest.
  • Refunding Credit Card Plus insurance customers who purchased coverage and “may not have met the employment criteria, meaning they may not, if the need arose, have been able to receive certain benefits under the policy.” In a deal struck with ASIC the bank soon start refunding around $10 million, including interest, to 65,000 customers.
  • Refunding Home Loan Protection insurance customers who had been charged an incorrect premium amount or had incurred premium charges before the home loan was drawn down. So far 9,600 customers have been identified and $586,000 has been repaid.
  • The bank says it in on-going discussions with ASIC over the regulator’s concern some Essential Super customers may have been given personal advice rather than general advice during the sale of the product.
  • Charges on disputed card transactions. The bank noted when refunding disputed transactions on customers’ cards, while the transaction itself was correctly reversed, certain charges associated with the disputed transactions were not always correctly adjusted. After reviewing 4.5 million transactions dating back to 2009, refunds totalling $5 million will be made to around 335,000 customers.
  • Deceased estates. “Today, ASIC was notified about an issue affecting some insurance products, where for a number of accounts, a confirmation of the cancellation of an existing insurance policy may not have been sent to the deceased estate,” CBA said in a statement. “We are currently undertaking a detailed investigation back to the year 2000 to confirm the number of affected customers and will contact their estates and remediate if appropriate.”
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And hoocoodanode? Via Banking Day:

Members of Commonwealth Bank’s senior management team were apparently drilled in methods for handling an operational crisis many years before the recent, destabilising AUSTRAC legal action lobbed in the Federal Court this month.

Alden Toevs, the former chief risk officer, shared a colourful account of the experience of the bank’s management during an exercise devised by him that blindsided management when put to the test.

In a panel discussion on operational risk at an ASIC conference in March 2014, Toevs said he organised simulated crisis events to test the resilience of senior executives.

Toevs was horrified by the response of the bank’s top management in the first trial that was held “several years” before March 2014, describing their performance as “pathetic”, “unbelievably bad” and “inept”.

Governance = zero. One wonder why Narev is not out on his ear today.

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Whatever woes you think are headed the way of the banks owing to a fraying social licence to operate, they just doubled.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.