In October 2001, when the USA PATRIOT Act was awaiting an in-force date, my warnings as to the risks of foreign banks dealing in US Dollars via the Correspondent Banking system were not merely ignored, they were heavily criticised by the big accounting and law firms.
During the past decade, I have repeatedly warned that the reputational risk that, in the mid 1990s, we all thought companies would face if they were found to have been involved in money laundering had been wrong as to the type of risk: in fact the risk is that when one regulator finds a shortcoming, other regulators, domestic and foreign, will pile in with their own investigations – and, of course, demands for payment. There is no such thing as double jeopardy where regulators are concerned: a success by one opens the door to others.
The reality of the Commonwealth Bank case is that the type of offence and its scale are, in the great scheme of things, nothing special. After all, tens of thousands of completed cash transaction reports were found stuffed in cupboards at a Las Vegas casino more than a decade ago and no one made much fuss, although the casino, Las Vegas Sands, did negotiate, almost a decade later, to avoid prosecution by the payment of money to various government bodies.
Media has been scurrying around trying to find evidence that the bank willingly laundered moneys or, worse, conspired to move money that was intended for use in terrorist acts or for heinous offences involving children.
The simple thing is this: Australian banks are, generally, not well run. Often major decisions are made by those who have migrated to banking from large consulting companies and decisions are costs driven and, in at least one case, large parts of the operations are outsourced to consulting companies which have no direct involvement with the bank’s general operations and which have created administration systems which actively militate against compliance and risk management staff getting the information they need.
We can attest to this – one Australian bank has been removed from our own client list because their outsourced purchasing system is too expensive for us to deal with in relation to publications and educational courses. It is a bank that even after Accenture abolished, for internal purposes, its incredibly badly designed and implemented PIP review system continued to use it to “manage out” staff at will and, in some cases, to purport to deny staff the right to a tribunal review of the mismanagement of staff.
For these bean counters, money laundering compliance and risk management is a cost to be at least minimised and ideally avoided.