AUSTRAC, APRA take action against Bendigo Bank for AML deficiencies

AUSTRAC is doubling down on its calls to bolster its anti-money laundering and counter-terrorism finance actions as it reveals, alongside the Australian Prudential Regulation Authority (APRA), to take enforcement action against Bendigo and Adelaide Bank.

Both major banks are facing action from the regulators for weaknesses in the money laundering risk management, non-financial risk management practices and risk culture.

AUSTRAC revealed the decision to take action following findings of an independent review undertaken by Deloitte into suspected money laundering at a Bendigo Bank branch, which the bank had reported to the regulator.

It was noted that this review found “significant deficiencies” with Bendigo Bank’s approach to the identification, mitigation and management of money laundering and terrorism financing risk.

Katie Miller, acting chief executive of AUSTRAC, said it had been closely monitoring Bendigo Bank’s compliance with AML/CTF obligations.

“This enforcement investigation follows supervisory engagement with Bendigo Bank and the bank’s recent disclosure of deficiencies in its approach to the identification, mitigation, and management of money laundering and terrorism financing risks,” she said.

“Our investigation will examine Bendigo Bank’s compliance with the AML/CTF Act and inform any further AUSTRAC action.”

From the concerns raised, most were brought forward by APRA, which were then embodied by AUSTRAC.

A main concern highlighted by APRA, and agreed with by AUSTRAC, was that the weaknesses identified by the investigation may be applicable across the bank’s operations more broadly.

In a move to ensure Bendigo Bank intensified its efforts to strengthen its non-financial risk management systems and practices, APRA and AUSTRAC outlined key actions.

These included APRA requiring Bendigo Bank to undertake a root cause analysis to understand the extent of non-financial risk management issues at the bank, going beyond money laundering and terrorism financing, as well as requiring Bendigo Bank to hold an operational risk capital add-on of $50 million.

AUSTRAC also revealed it had commenced an enforcement investigation focused on whether the bank had complied with its obligations under the AML/CTF Act.

John Lonsdale, APRA chair, noted that although Bendigo and Adelaide Bank were financially sound and “comfortably above its core capital and liquidity requirements”, APRA was concerned there were significant gaps in its risk management framework needing to be addressed as soon as possible.

“While the non-financial risk, anti-money laundering spaces are a priority in light of the recent independent report, APRA is concerned that similar weaknesses may exist across the bank,” Lonsdale said.

“The measures we are announcing alongside AUSTRAC aim to ensure that fundamental deficiencies in Bendigo Bank’s risk management framework are identified and addressed, and those responsible are held to account as appropriate.”