The Commonwealth Bank of Australia (ASX: CBA) share price broke a new record high on Wednesday despite being tainted by a money laundering scandal.
The CBA share price jumped over 1.4% to $104.82 even as the S&P/ASX 200 Index (Index:^AXJO) struggled to hold its head above water.
Investors aren't perturbed by news that the bank may be in breach of anti-money laundering laws, reported the Australian Financial Review.
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Money laundering scandal fails to dampen CBA share price
The potential legal headache is linked to an investigation into BSP Financial Group Ord Shs (ASX: BFL) by Papua New Guinea authorities.
BSP is a partner of CBA and to National Australian Bank (ASX: NAB). The report hasn't impacted on the NAB share price either as it jumped 0.7% to $26.86.
The two ASX big banks are correspondent banks to BSP. This means CBA and NAB provide a channel for BSP's customers to transfer money in and out of Australia.
How BSP's legal problem can impact on CBA and NAB
If BSP is found guilty and is punished with sanctions, CBA and NAB will be liable under Australian law as Australian banks are required to undertake regular due diligence of their partners.
Investors will be getting another serious case of déjà vu. Australia's largest financial institutions have a long and sorry track record of breaching regulations and behaving badly.
They have since made strides in cleaning up their act following the Haynes Royal Commission, although this latest development is a setback.
BSP under investigation
The PNG money laundering probe into BSP started in late 2019 by Financial Analysis and Supervision Unit (FASU), according to the AFR.
BSP was issued with a "show cause notice" as to why it shouldn't be sanctioned by FASU in late 2020.
The sanctions could involve a fine, enforceable undertaking, formal public warning and/or having an enhanced audit process imposed upon the newly listed bank.
Non-disclosure issues
BSP floated on the ASX on 25 May but it didn't disclose the money laundering probe. However, it did highlight "elevated corruption risk" in documents lodged on the ASX.
This probably won't cut it with the ASX or shareholders if it is proven that BSP had known about the probe by FASU.
Both CBA and NAB declined to comment on BSP, according to the AFR. The big banks would only say they comply with Australian regulations.
Shareholders will be hoping this is true.
