The Commonwealth Bank of Australia (ASX: CBA) could be in another spot of regulatory bother, after the Australian Transactions Reports and Analysis Centre (AUSTRAC) launched civil proceedings against the bank in federal court yesterday.
AUSTRAC alleged that Commbank failed to comply with the law on 53,700 occasions by failing to report cash deposits of $10,000 or more made through its intelligent deposit machines. By law all cash transactions above $10,000 must be reported. The alleged failures to comply occurred between November 2012 and September 2015.
Each of the 53,700 occasions carries a potential $18 million dollar fine, with a theoretical maximum of $966 billion. However, the number of transactions relating to possible money laundering or the financing of terrorism is thought to be much smaller.
What sort of impact could this have on shareholders?
The idea of a $966 billion fine is pure fiction in my opinion. Historically, myriad other regulatory issues have not even resulted in a meaningful fine on Commonwealth Bank, let alone a fine large enough to actually hurt the company's $9.6 billion per annum profit machine.
There is also a noted lack of political will for taking the banks to task over issues like this. So my best guess is that the most likely outcome is 'storm in a teacup', albeit with an outside chance of 'severe squalls' and an excruciatingly minor chance of 'Moby Dick and Captain Ahab'.
Notably, Commonwealth Bank has said it is cooperating fully with AUSTRAC, unlike in previous cases of litigation where the bank has fought the regulators each step of the way. So a fine seems likely, although civil (not criminal) proceedings were launched which can lead to a softer outcome. The bank announced yesterday that it was reviewing the proceedings, and would have more to say in due course. Speaking for myself, I would be inclined to avoid the big 4 banks today due to their long history of regulatory issues.
