National Australia Bank is facing enforcement action from Austrac over “potential serious and ongoing non-compliance” with anti-money laundering and counter-terrorism financing laws.
The bank notified the ASX on Monday that the financial crimes agency had launched an investigation into shortcomings in NAB’s customer identification procedures and customer due diligence.
However, NAB gave its shareholders no specific details on which parts of its business were exposed to the investigation and remediation work.
The bank has disclosed the existence of AML/CTF compliance “issues” in each of its financial reports since November 2017, but has consistently baulked at giving investors a clear description of the compliance breakdowns or tangible information about any progress made to remediate its systems.
NAB chief executive Ross McEwan said the bank was continuing to cooperate with Austrac in its investigations.
“It is a key priority for everyone at NAB to uplift our financial crime capabilities, minimise risk to customers and the bank, and improve operational performance,” he said.
“That’s why we are so focused on getting the basics right every time to protect our customers and our bank.”
According to the bank, Austrac indicated in a letter last Friday that it currently had no plans to launch civil proceedings against NAB over the company’s longstanding non-compliance.
“In the letter to NAB, Austrac stated that it has not made any decision about whether or not enforcement action would be taken. AUSTRAC stated that, at this stage, it is not considering civil penalty proceedings and that this decision is ‘reflective of the work undertaken’ by NAB to date,” the bank told the ASX.
“Austrac’s referral to its enforcement team follows regular engagement by NAB with Austrac over a long period of time, both to report issues and keep Austrac informed of progress in uplifting and strengthening the Group’s AML/CTF Program.”
While NAB appears likely to escape the massive billion dollar fines incurred in recent years by CBA and Westpac for their respective AML transgressions, it is still exposed to penalties that could have a material impact on its bottom line.
There is an almost comical dimension to NAB’s threadbare disclosure to the ASX of its AML problems because details of the bank’s “pervasive” non-compliance are already in the public domain.
Documents furnished by the bank to the Hayne Royal Commission in 2019 show that NAB’s AML systems were non-compliant across the bank’s domestic and international operations since at least 2012.
In a 26-page report on the condition of the bank's risk management in October 2018, former chief risk officer David Gall warned the NAB board Austrac may be stepping up its interactions with the bank - a development he indicated carried "significant regulatory risk".
Gall reported that breakdowns in AML compliance were “pervasive across the group including product, distribution and operations”.
He highlighted ineffective AML systems at a string of subsidiaries including JB Were, MLC, the NAB Asset Servicing business and the Singapore banking operation.
Throughout 2017 NAB was identifying a myriad of AML/CTF issues that risk officers assessed as "red" matters requiring urgent attention.
These included a review by the Monetary Authority of Singapore of NAB's