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Monday, 04 June 2018
Transcript

Joint Press Conference with Ms Nicole Rose, Chief Executive Officer of AUSTRAC, Melbourne

Subjects: AUSTRAC and CBA record penalty agreement; security requirements for politicians.

EO&E...........................................................................................................................................

PETER DUTTON:             

As you are aware, there's an arrangement that's been entered into between AUSTRAC and the Commonwealth Bank of Australia. It's a settlement of $700 million, which is by far and away the biggest corporate fine in this space. It has been worked on by AUSTRC over a period of time.

Nicole's going to go into the details shortly, but this relates to 53,000-odd transactions and breaches. I want to pay tribute to AUSTRAC. Nicole is one of our pre-eminent crime fighters in this country and she presides over an organisation of 300 people. I really want to pay tribute to AUSTRAC and to all of the staff for the work they've done in this particular circumstance.

It is unacceptable for any financial institution, let alone the Commonwealth Bank, to be in a position where they are failing to meet their obligations. As we know, if we don't have proper oversight of transactions, criminal syndicates take advantage of it and that's exactly what happened here.

This needs to be a very clear message to financial firms; anyone who has an obligation to report under the Act, this needs to be a very clear message to all of them that there is a significant and serious financial consequence and representational consequence if people act outside of the law.

AUSTRAC has worked very closely with the CBA. Once, obviously, the breaches had been detected and the process was underway, it was clear that CBA engaged constructively with AUSTRAC.

So I acknowledge that and I think they've recognised and said publicly that they've made a serious mistake here. They've owned up to the mistake that they made and they're now paying a significant financial penalty for that.

So Nicole, I'll hand across to you.

NICOLE ROSE:                

Thank you Minister. As the Minister's already said, if this agreement is accepted by the Federal Court, this will be the largest civil penalty ever ordered in Australia and let me stress, this matter is not over, it does have to go before the court. However, AUSTRAC and CBA believe that this outcome reflects the seriousness and magnitude of the compliance failings of the CBA.

CBA has agreed that there were failures related to its Intelligent Deposit Machines, failures with management of risks, around its IDMs and failures to provide timely threshold transaction reports and suspicious matter reports. CBA also admitted failures around appropriate monitoring of customers and accounts.

This case shows the very real nature of how organised criminals exploit the financial sector when reporting entities fail to adhere to their AML/CTF guidelines and requirements. Organised crime puts the financial sector and the community at risk of harm and undermines the trust Australians have in our financial institutions. This is something that AUSTRAC cannot and will not tolerate. This was the impetus behind the launching of the proceedings.

 It is the responsibility of financial institutions, their boards and senior management to ensure the organisation they oversee takes its AML/CTF obligations seriously and that there is an organisational culture that supports this. These legal obligations reflect a community expectation that the Government and industry will work together to protect the community from criminal groups and individuals who might use our institutions to support their illegal activity and cause harm.

CBA has commenced a plan to rebuild its compliance program. AUSTRAC will work closely with CBA to oversee and support this work. I hope that CBA actually becomes an example of not just complying with the obligations, but be at the forefront of future efforts to combat financial crime and terrorism financing.

As the Minister said, throughout these proceedings CBA has remained committed to working with AUSTRAC. As a government and industry partner, Fintel Alliance, they've worked very closely with us to disrupt crime and terrorism. I hope to see this commitment continue and indeed increase.

 I'd like to finally thank a few people for the very large amount of work. It's been a long ongoing set of investigations. I'd like to thank, firstly, our law enforcement partners; the Australian Federal Police, the New South Wales Police and the Western Australian Police – all who contributed extensively to our investigation. I would also like to express my gratitude to the Australian Government Solicitor and counsel for all of their work, especially Sonja Marsic and Simon White SC. I want to extend my sincere thanks to my Deputy, Peter Clark, who took the decision to launch these proceedings late last year.

Lastly, as the Minister did, I would like to thank all of the staff at AUSTRAC for their dedication in achieving such a successful outcome, their tireless efforts to protect our community from those that seek to do us harm. Thank you.

PETER DUTTON:             

Okay, are there any questions?

QUESTION:                     

Nicole, James Frost from the Financial Review. Last week the Commonwealth Bank's chief risk officer David Cohen said it would take three to five years to rebuild the bank's risk systems. Does that give you much confidence about the future of compliance of the Commonwealth Bank?

NICOLE ROSE:                

I was certainly surprised by the length of time. Certainly systems are difficult and when you've got a company that's got over 50,000 staff and so many outlets, I can't imagine that it's a small task, but three to five years is too long. Certainly for AML/CTF obligations we'll be looking at compliance and a remediation program that [inaudible] be a lot shorter time frame than that.

QUESTION:                     

Could I ask you also, how confident are you that these sorts of breaches aren't occurring at other banks around the same size and much smaller with less resources?

NICOLE ROSE:                

I mean to be perfectly honest, we're 300 staff and we have reporting entities of over 14,000. This is the reason we need to work very closely with all of our reporting entities, particularly the larger professional institutions. We want them to become partners with us, to actually look at the compliance issues, share that intelligence with us and make sure that it's not occurring. The banks are not the target of AUSTRAC. The criminals that use financial institutions to launder money and finance terrorism are our targets.

QUESTION:                     

It's a record penalty for a corporation.

NICOLE ROSE:                

Yes, it is.

QUESTION:                     

The number of breaches were huge; 53,000 as the Minister said. Do you feel you've got bang for your buck? Can you compare it to something like the Tabcorp settlement?

NICOLE ROSE:                

Yes, absolutely. So the Tabcorp settlement was also ours. This is over $650 million more than the Tabcorp settlement. There was no criminality on behalf of CBA. This is a massive non-compliance issue and whilst I won't want to pre-empt what the court will be looking at, they have to look at the fact that this needs to be a deterrent, which I think it very much is, but it's not actually meant to be a punishment.

QUESTION:                     

While it is obviously quite a large fine, there's some calculations this morning based on the share price that CBA has already recouped the $700 million today which it will need to pay. So while it's large, could it have been larger?

NICOLE ROSE:                

It absolutely could have been larger. If you extrapolate the number of fines with the average fine allowed through the legislation, it gets up to a trillion dollars. Would that ever be enforced? No it wouldn't, but now it's a matter for the court. CBA and AUSTRAC think that it's an appropriate settlement and reflects the extent of the non-compliance.

QUESTION:                     

Minister, just on something slightly different. The man who had a go at Malcolm Turnbull for cutting in line at a Brisbane pub last month has been charged with attempted murder. Are you aware of this and is it concerning that he showed so much aggression to the Prime Minister?

PETER DUTTON:             

I'm not aware of the circumstances around that.

The only point I'd make is that there was some in the Labor Party, I think including Mr Shorten at the time, that tried to make an issue of this and again, I think the footage demonstrated that the political opportunism of Mr Shorten was pretty crass and I think it's been shown for what it was; a cheap political jibe.

In terms of the individual's circumstances, I don't have any detail about that individual.

QUESTION:                     

Do you think there needs to be more security around politicians?

PETER DUTTON:             

Well the Australian Federal Police obviously makes decisions in relation to threat assessments, along with ASIO, around high office holders and they make decisions about what close personal protection arrangements or security arrangements are put in place otherwise. Obviously as has been the case for a long period of time, the Prime Minister has a full-time security detail and those issues are looked at by the Federal Police regularly, including where there's been an instance or a breach and they would respond accordingly.

QUESTION:                     

The money that has gone missing, or presumed missing in these transactions, where is it? Did it indeed finance terrorism or was it laundered?

PETER DUTTON:             

Well obviously there are a number of investigations that are under way at the moment, not only by the Australian Federal Police, but also by the policing agencies otherwise. One of the advantages, the true advantages of the Home Affairs portfolio, is that the agencies now have a greater ability to work even more closely together and that's been the case in relation to this investigation as well. So all of that is under investigation at the moment.

As Nicole pointed out before, people that have conducted themselves outside of the law, where they have breached the law, there are significant penalties to pay and if they're involved in criminal activity, involved in money laundering otherwise, that is a very serious offence in our country.

The fact that CBA had systems which completely failed and that the culture had developed where these breaches took place, meant that they have paid a $700 million fine – the biggest in Australian corporate history – and that should send a shockwave across financial service firms right across the country. People have a serious obligation to meet. They must meet it and if they don't there will be significant civil, and if appropriate, criminal penalties to pay.

QUESTION:                     

Nicole, can I ask you, the Commonwealth Bank has been known for a somewhat combative relationship and approach with the regulators – this was called out by APRA late last year – how would you describe your agency's relations with the Commonwealth Bank in relation to this negotiated the settlement?

NICOLE ROSE:                

I think the length of time shows that there were ongoing negotiations. The fact that we chose to take the action we did was entirely appropriate to look at the seriousness of that and perhaps the lack of action that had occurred over those years, but I'd have to say since starting as CEO of AUSTRAC, my engagement with the CBA senior management has been professional and transparent and that's why we were able to get to the settlement we have today.

QUESTION:                     

Where does the $700 million go? Does it go to AUSTRAC or the Government?

PETER DUTTON:             

It will go to the Government as any fine would.

I just wanted to add to that last point; I had a conversation yesterday with the CEO of the CBA and I have to say, as Nicole reports, he was very mindful of the situation that CBA was in. I think he has shown the leadership and the senior leadership team have demonstrated through their actions and their discussions and negotiations with AUSTRAC, that they realise there's a serious breach that's taken place. They have negotiated with that in mind and I think, as Nicole pointed out in her earlier remarks, CBA will be minded to be an exemplar in this space over the coming years. I think they will demonstrate to other banks, to other financial institutions what it is to have a perfect arrangement, frankly, in relation to these reporting requirements and other obligations that they have under the legislation.

So the discussion yesterday was…I was impressed in terms of the attitude of the CEO and his desire to address the reputational risk issues and get the CBA back on track.

QUESTION:                     

The Treasurer Scott Morrison in his press conference this morning, he talked a lot about trust. The CBA has a lot of work to do [inaudible] there is still a class action on this exact issue. Maurice Blackburn [inaudible] shareholders who feel they've been duded. What would you say to shareholders?

PETER DUTTON:             

Well clearly the CBA has let shareholders down. Frankly, CBA's let Australians down. Where we have a lack of compliance with the law, particularly where we're talking about criminals or terrorist financing, that is a serious breach of the law and a $700 million payment, the biggest in Australian corporate history, is reflective of that.

So the CBA does have a lot of work to do, but the important point is that I think the CEO and the leadership team within the Commonwealth Bank recognise that they do have to rebuild their reputation, that they do need to rebuild that trust and the most positive thing is that they are approaching it in that spirit. There's no reluctance to accept responsibility for the mistakes that they've made. They've engaged with AUSTRAC in a productive way to arrive at this settlement arrangement and no doubt, as I say, into the future, I think they can make further recompense through their own actions in terms of the compliance culture and their desire to rebuild that trust and I think we'll see that within the CBA.

Alright, thank you very much.

NICOLE ROSE:                

Thank you.

[ends]