[SYDNEY] Two of Australia’s most senior financial officials called into question the integrity of the country’s top banks on Friday, saying they risked losing public trust in the wake of unprecedented money-laundering and terror financing allegations.
The latest scandal to rock Australia’s highly profitable “Big Four” banks is potentially the worst, with Commonwealth Bank of Australia accused by the financial intelligence agency of allowing criminals to launder millions of dollars.
Australia’s biggest mortgage lender has blamed a software error and vowed to fight the allegations in court, but on Friday its problems deepened when the corporate regulator expressed fresh concerns about CBA’s management and said it was opening a separate investigation.
Australian Securities and Investment Commission (Asic) Chairman Greg Medcraft complained that CBA executives had not informed him of the compliances problems during a meeting he held with them two days before they were made public last week. “This is the largest company in the country and I think Australians would have expected better,” Mr Medcraft said.
Market voices on:
The allegations levelled in court by financial intelligence agency Austrac, accusing CBA of 53,700 breaches of anti-money laundering and counter-terrorism laws, threatened to undermine”global trust” in Australia’s financial sector, he said.
In separate remarks to federal parliament’s economics committee, Reserve Bank of Australia Governor Philip Lowe described the Austrac allegations as “very serious” and said”somebody has to be accountable”. “The desire for short-term profit has meant not enough attention is being paid to risk management, trust has been strained, banks know that,” he said.
Commonwealth Bank shares fell 1.1 per cent to a two-month low of A$79.95 on Friday morning, in line with a broad selldown in equities. About A$6.6 billion (S$7.09 billion) has been wiped off CBA’s market capitalisation since Thursday, when Austrac announced its case.
Mr Medcraft said ASIC’s separate probe into CBA would focus on the conduct of executives and directors, and whether the bank had complied with disclosure and licensing obligations, including having enough contingent liabilities.
CEO Ian Narev has faced calls from some quarters to resign over the money-laundering allegations, the first of their kind against a top Australian bank and the third scandal to engulf CBA under his watch.
Last year it admitted to using unscrupulous practices to cheat people out of life insurance payments, and in 2014 Mr Narev publicly apologised after CBA advisors were found to have given customers poor financial advice.
Responding to the latest crisis, CBA scrapped executive bonuses on Tuesday and established a board sub-committee to look into the money-laundering claims.
But the case has fuelled calls for a broad judicial inquiry into Australia’s banking system, which could recommend greater regulation or even criminal charges.
Treasurer Scott Morrison said on Thursday that a so-called Royal Commission was not under consideration, although it has the strong backing of the public and the opposition Labor Party.
Foreign governments are also watching the case, as some of the illicit funds were allegedly transferred to accounts in places like Hong Kong.
The Hong Kong central bank said it would “review the information to assess relevant implications for Hong Kong”.
More Info: www.businesstimes.com.sg