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CBA shares drop as fresh allegations loom

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Commonwealth Bank shares have dropped after Australia’s largest bank revealed AUSTRAC intends to make further allegations related to breaches of money laundering and counter-terrorism laws.

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CBA shares fell as much as one per cent in the first few minutes today, hours after the lender said it expects the Federal Government’s financial intelligence unit to make fresh allegations.

At midday, CBA shares were down 0.4 per cent to $79.995.

The bank late on Wednesday filed its defence to AUSTRAC’s initial allegations – made in August – admitting it was late filing 53,506 reports on transactions due to a systems error and that it did not adequately adhere to risk assessment requirements for automated deposit machines.

“AUSTRAC has indicated that it proposes to file an amended statement of claim containing additional alleged contraventions,” CBA said in its statement released after the market closed on Wednesday.

“If an amended claim is served on us, we expect the court would set a timetable for CBA to file an amended defence.”

CBA shares shed about 14 per cent of their value over the five weeks immediately after AUSTRAC alleged it had failed to properly monitor potentially suspicious transactions.

In that period CBA announced that chief executive Ian Narev would retire and that executives would not receive their short-term bonuses.

The shares had since recovered much of their losses, and were valued at $80.31 before the open on Thursday – down about five per cent since August 3.

CMC Markets chief market strategist Michael McCarthy said the outlook for CBA still depended on how AUSTRAC pursues the case.

“The key issue is whether AUSTRAC looks at this as a single contravention or 53,000 separate breaches, each subject to a separate penalty,” McCarthy said.

The bank argues that its failures should not amount to separate contraventions of the law.

It has admitted to 91 of 174 of AUSTRAC’s allegations that it failed to properly submit suspicious matter reports (SMRs), and will argue that many of those relate to reports that were missing specific transaction details, and should not result in a civil penalty.

The bank will also argue it lodged a significant number of SMRs related to the customers highlighted in AUSTRAC’s allegations, and that this should be considered when the court assesses the harm caused by CBA’s failure to comply with all the legal requirements of those reports.

“During the period of the claim, CBA submitted more than 36,000 suspicious matter reports, including 140 in relation to the syndicates and individuals referred to in AUSTRAC’s claim,” the bank said.

– AAP

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