The Commonwealth Bank of Australia (ASX:CBA) share price slid 3% to $81.51 on Friday morning on above-average volume as shareholders digested the news of a civil lawsuit being launched against the company.
The Australian Transaction Reports and Analysis Centre (AUSTRAC) launched a lawsuit against Commbank alleging the company failed to comply with anti-money laundering (AML) laws on 53,700 occasions.
The theoretical maximum fine for this alleged wrongdoing is monstrous, although the eventual fine will likely be far smaller. However, the consequences of AUSTRAC's lawsuit go far beyond the potential penalties that Commonwealth Bank may have to pay. Given that Commonwealth Bank sources some of its funding internationally, from places like the USA that have strict anti-money laundering laws, an adverse finding in the court case could also potentially impact Commbank's relationships with global banks.
Importantly, the issue appears to be a historical one, with the time frame for the failures reportedly between November 2012 and September 2015. Still, fellow big banks were quick to distance themselves from the issue, with National Australia Bank Ltd. (ASX: NAB), Westpac Banking Corp (ASX: WBC), and Australia and New Zealand Banking Group (ASX: ANZ) all making statements reaffirming their compliance and explaining the ways in which their technology could not have lead to the breaches that Commbank is accused of.
It seems that hardly a year goes by without one of our major banks becoming embroiled in some kind of scandal. Whatever the ultimate outcome for Commonwealth Bank, I'm not keen on the big banks today and have been avoiding them for some time.
