National Australia Bank under investigation for suspected breach of anti-money laundering and counter terrorism laws

On Monday, the National Australia Bank disclosed it is under investigation for suspected non-compliance to anti-money laundering and counter-terrorism laws, sparking concerns of higher compliance costs and potential fines.

According to Australia’s financial crime regulator, there were “areas of serious concern” that required further investigation; however, at this juncture of the investigation it is not considering a civil penalty.

In a statement, the Australian Transaction Reports and Analysis Centre (AUSTRAC) said the issues at NAB involved “potential serious and ongoing non-compliance” with KYC norms, customer due diligence and other compliance requirements.

“AUSTRAC’s concerns emanate from historical and contemporary compliance assessments,” said the agency in letter dated June 4, to the bank. “In particular, the seriousness of self-disclosed matters presented to AUSTRAC over a prolonged period combined with the accompanying closure rates is concerning.”

The investigation will now be handled by AUSTRAC’s enforcement team, said the agency.

In a statement, NAB said it would continue to cooperate with the AUSTRAC.

“NAB has an important role in monitoring and reporting suspicious activity and keeping Australia’s financial system, our bank and our customers safe,” said the bank’s CEO Ross McEwan in a statement. “We are very aware that we need to further improve our performance in relation to these matters. We have been working to improve and clearly have more to do.”

Since 2018, AUSTRAC levied $1.5 billion (A$2 billion) in penalties on NAB’s larger peers Westpac Banking Corp  and Commonwealth Bank for breaches of anti-money laundering laws.

In a note, analysts at JPMorgan said, the escalation in AUSTRAC’s investigation is likely to have material consequences for NAB, including higher compliance costs.

In a note, Credit Suisse analysts told clients that the market was likely to “dismiss” the regulator’s statement that it was not considering financial penalties.

“In our view the risk is not so much around the highlighted issues but the potential for a formal investigation to uncover additional issues which we have seen in other cases,” reads the note.

($1 = 1.2925 Australian dollars)

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