One of the first questions put to NAB’s new boss Ross McEwan at the precipitous interim profit briefing of investment analysts on Monday was whether his shareholders could expect a damaging legal claim from AUSTRAC for past breaches of anti-money laundering laws.
McEwan, who is now asking institutional and retail shareholders to buy A$3.5 billion of new shares to top up the group’s capital position, could not shed fresh light on the prospect of the regulator lobbing a monster civil claim.
Investors are nervous that NAB might be the next major Australian bank to cough up a massive fine for historical breaches of anti-money laundering and counter terrorism funding laws.
NAB revealed in its annual report last year that it had reported AML breaches to AUSTRAC and foreign regulators but in communications with investors it has never clarified what the breaches are.
Credit Suisse analyst Jarrod Martin yesterday asked McEwan if he could guarantee that NAB would be able to avoid a messy and expensive legal action from AUSTRAC in light of the Westpac case launched last year.
“We’ve been quite clear for the last 18 to 24 months that we’re in a conversation with AUSTRAC about our remediation of anti-money laundering,” said McEwan.
“We’re not aware of anything that will come out of the blue in the next week or two - but that’s not in my hands, that’s purely in AUSTRAC’s hands.
“But we’re not aware of anything of that nature – we haven’t changed our wording (of the contingent liability) in our risk factors.
“So nothing has changed whatsoever.”
A credibility problem for McEwan, chairman Phil Chronican and the other directors is that documents furnished to the Hayne Royal Commission show clearly that NAB’s non-compliance with AML laws was pervasive across its product offerings, distribution channels and general operations for many years.
One of the documents – a report to the board in October 2018 from former chief risk officer David Gall – highlighted cases of non-compliance and breaching in the JB Were subsidiary, the asset servicing business and the Singapore banking arm.
“AML/CTF issues remediated during 2018 financial year identified historical weaknesses in the execution and oversight of NAB’s AML/CTF Program, including: transaction monitoring, investigations, data, reporting, internal controls (and) oversight of the AML/CTF Program by Risk,” the former CRO told the board in the report.
Gall’s report documents cases of JB Were failing to report high value international fund transfers involving investors in its cash trust product.
His report also reveals that NAB was reprimanded by the Monetary Authority of Singapore for non-compliant transaction monitoring of cross border payments.
NAB has never revealed details of these cases directly to shareholders even though their existence has been in the public domain for more than a year.
Nor has the bank explained why its AML breaches do not warrant a specific provision given that two of its industry peers – CBA and Westpac – have copped record penalties for systemic non-compliance.
While NAB directors might remain “uncertain” as to the size of the penalties that could flow from its AML compliance breaches, they