Former CBA boss denies receiving early warning on AUSTRAC action

The former chief executive of the Commonwealth Bank has denied a board member warned him the lender was likely to face proceedings over breaches of anti-money laundering laws, two years before it was hit with legal action by the financial intelligence agency AUSTRAC.

Ian Narev, the bank’s chief executive between 2011 and 2018, continued giving evidence on Tuesday as part of a class action, brought on behalf of investors who suffered losses when CBA’s share price fell on the back of an announcement that AUSTRAC would begin legal proceedings against the bank for breaching anti-money laundering laws in 2017.

CBA later agreed to pay a $700-million fine to settle the case with the watchdog, admitting to breaching the Anti-Money Laundering and Counter-Terrorism Financing Act a total of 53,506 times over three years.

The plaintiffs in the class action allege that CBA knew about the non-compliance several years before AUSTRAC’s announcement and by failing to disclose that information to the ASX, it breached its continuous disclosure obligations. The bank argues that when it first became aware of the breaches, it did not know that AUSTRAC would launch a lawsuit, and there was no price sensitive information about the matters that required disclosure to the market.

In the Federal Court in Sydney on Tuesday, lawyer for the plaintiffs, Jeremy Stoljar, SC, asked Narev whether he had any conversations about AUSTRAC in 2015 with Jane Hemstritch, who at the time was on the boards of CBA and Tabcorp. In mid-2015, AUSTRAC brought proceedings against Tabcorp for breaching anti-money laundering and counter-terrorism financing laws.

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Narev said that he remembered speaking to Hemstritch about her perspective on the anti-money laundering issues being faced by Tabcorp.

“She warned you … AUSTRAC was likely to bring proceedings against CBA?” asked Stoljar.

“I disagree with that completely,” said Narev. “I remember words she mentioned to the effect of, ‘Make sure the bank is keeping close oversight on this’, I certainly remember nothing of the sort you suggested there.”