World Economy

Australia’s Biggest Bank Vows to Fight Class Action

Australia’s Biggest Bank Vows to Fight Class ActionAustralia’s Biggest Bank Vows to Fight Class Action

Commonwealth Bank of Australia is facing a class-action shareholder lawsuit over the decline in its stock price following allegations of compliance breaches that allowed its ATMs to be used to launder money.

The bank said it planned to vigorously defend the suit, which was filed by Maurice Blackburn Lawyers on Monday in the federal court in Melbourne, Dow Jones reported.

The legal action follows a civil suit launched on Aug. 3 by the government’s financial-intelligence agency, which has spurred independent reviews of the bank by regulators. The Australian Transaction Reports and Analysis Center, or Austrac, alleged more than 53,000 breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act, most relating to a failure to provide timely transaction reports on deposits into accounts at the bank over several years until 2015.

Shares of Commonwealth Bank, Australia’s largest bank by market value and the biggest residential mortgage lender, dropped more than 8% immediately after Austrac filed its suit, and have underperformed the wider financial industry since.

Maurice Blackburn said Commonwealth Bank failed shareholders by not revealing the alleged breaches until August, despite later acknowledging that its board was aware of them in the second half of 2015.

The case was filed on behalf of investors who bought the bank’s shares between July 2015 and August 2017 and who held some or all of those shares until after the afternoon of Aug. 3. The suit names outgoing Chief Executive Ian Narev, Chairman Catherine Livingstone, Chief Risk Officers Alden Toevs and David Cohen, and other senior figures at the bank.

“Shareholders have every right to seek accountability,” said Andrew Watson, head of class actions at Maurice Blackburn.

Austrac’s case centers on Commonwealth Bank’s “intelligence deposit machines”, which allow anonymous deposits of up to 20,000 Australian dollars ($15,536) in cash at a time and automatically credit accounts. The agency alleged the bank failed to provide necessary reports on transactions above a A$10,000 threshold over three years from 2012, failed to report some suspicious transactions on time or at all, and neglected to monitor customers even after it became aware of suspected money laundering.

The bank has yet to file a response in court but has said a coding error introduced with a software upgrade accounted for the vast majority of reporting failures alleged by the agency.

Livingstone has said the bank acted quickly to fix the coding error after it was discovered in 2015, but acknowledged the damage the suit meant for the bank’s reputation.

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