CBA Money Laundering Case Analysis

This assignment examines the Commonwealth Bank of Australia's (CBA) involvement in a money laundering scandal. It analyzes the bank's failure to mitigate risks associated with their intelligent machines, which were exploited by criminal syndicates. The analysis focuses on legal violations under the Corporation Act 2001 (Cth), particularly Section 180(1), and the potential personal liability of CBA directors for negligence.

Running head: BUSINESS LAW
Business Law
Name of the Student
Name of the University
Author Note

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Table of Contents
Part A...............................................................................................................................................2
Issues that are faced by crown resorts.........................................................................................2
Role of ASIC...............................................................................................................................3
Possible Remedies.......................................................................................................................4
Part B...............................................................................................................................................5
Reference List..................................................................................................................................8

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Part A
Issues that are faced by crown resorts
The directors of the organization have certain responsibilities that help them in acting in
the best interest for the company. Section 180 (1) of the Corportaion Act (Cth) says that the
directors along with the officers of a particular company has to organize diligence and care with
respect to the operations that are being carried out within the organization. The diligence and
care can be evaluated by nominating a person who is hypothetical and acts as a director in the
present situation so that the analysis can be done with respect to the level of reasonability that is
present within the decision1. The decision that will be taken has to be for the best interest of the
organization. In the case of Asic vs Cassimatis2, it can be seen that one of the reasonable director
will not breach the land law under any circumstances. The shareholders also do not have the
right to instigate these acts. In the present situation, the directors of crown sports has somehow
violated the provisions by appointing agents to be sent to China so that they can recruit the high
roller gamblers, as gambling is illegal in China. With respect to this, the action of the employees
within the organization has led to the arrest by the Chinese officials, which is inclusive of the
Australian people. Additionally, it can be stated that there has been a 14 percent decline within
the shares of the organization, which has led to huge losses for the company as well as its
shareholders. The company also faced loss of reputation due to the actions that it took. In the
given situation, the legal issues of the corporate that are being faced by the directors of the
company are in direct relation with the directors that have violated these rules. The discussed
1 Corporation Act 2001 (Cth) at section 180(1)
2 (No 8) [2016] FCA 1023

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directors have breached the section 180 (1) of the Corporation Act by not acting in a diligent and
careful manner with relation to the affairs of the company.
Role of ASIC
The Australian Investment and Security Commission is a corporate body that is present in
Australia and keeps a check on the duties and the affairs that are being carried out by the
corporate organizations. The ASIC is a body that regulates the integration of the corporate bodies
along with the financial services, and the credit regulators that are present among the consumers
in Australia. The main vision of the commission is to help the markets in funding the economy
and help in the growth of the economy. The main purpose of ASIC is that it helps in ensuring the
wellbeing of Australia with respect to the financial terms. It also helps in boosting the trust and
confidence of the investors and consumers that ensures efficiency in the market by allowing
proper registration services. The ASIC provides actions against the organizations that fail in
acting with respect to the legal and ethical manner, which leads to losses among the creditors and
investors. It helps in providing better orders by allowing financial penalties and the suspension of
directors if any violation can be identified3. In the situation of crown resorts, it can be seen that
the employees have been arrested due to illegal activities in China and ASIC will play an
important role in investigating the matter. This has been done due to the fact that the decision of
the directors will result in the loss of the creditors and investors within the company.
Additionally, it can be stated that the companies that are registered within the Australian Stock
Exchange (ASX) has been found guilty of violating the law and the primary duty of ASIC is to
look into and investigate the matter. If ASIC finds that the directors of the company have
breached its corporate duties, then it will take up legal actions against the company in Australia.
3 Our role | ASIC - Australian Securities and Investments Commission. (2018). Asic.gov.au. Retrieved 3 January
2018, from http://asic.gov.au/about-asic/what-we-do/our-role/

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Possible Remedies
If the investigation conducted by ASIC revealed that the directors of the company have
been involved in illegal activities, and then there are possible remedies that are present with
respect to the Corporation Act. The duties of the directors that they have violated in the CA will
give rise to provisions of civil penalties. Additionally, the directors might be prosecuted under
the liability of criminal code under the section 6.1, if the directors are found to violate the
provisions that are present in the section 184 of the Act that is to breach the duties in the section
180-183 in a reckless manner under the Corporation Act. The provision of civil penalties is
present under the section of 1317E of the Act4. The directors may also likely face a penalty that
is financial up to an amount of A$200,000 if the breach is of serious nature. Additionally, the
directors of the company may also get suspended with respect to managing a corporation for a
period of 5 years that is present under the provision of 206C of the Act5. The directors can seek
an alibi that is present in the section of 1317G in which the breach that has been committed by
them can be pardoned by the court with respect to the duties that they carry out within the
organization. However, the ASIC has to prove the fact that the directors have committed a
breach of the Act. In the case of Australian Securities & Investments Commission (ASIC) vs
Lindberg6, the ASIC gained support by obtaining a suspension of 2 years and a financial penalty
of A$100,000, as the directors had violated under the section of 180 (1) of the Act. The directors
have the provision to settle its penalties outside the court but ASIC has to prove the case within
the court.
4 Corporation Act 2001 (Cth) at section 1317E
5 Corporation Act 2001 (Cth) at section 206C
6 [2012] VSC 332

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Part B
The Commonwealth bank has faced numerous problems with respect to the drop in ts
share prices after AUSTRAC registered a case with respect to the laundering of money against
the company. This also subjected the organization to take up potential action in relation to its
shareholders. AUSTRAC has accused the organization in laundering of money on a consistent
manner by funding terrorist operations and criminal gangs. The CBA have been accused of other
breaches with respect to counter-terrorism financing and laundering of money rules. The
proceedings of civil penalties have been started by AUSTRAC against the company in the
federal court under “serious and systemic non-compliance”7.
The CBA had subjected the community to ongoing crimes and serious financial issues,
which has been filed in the court. However, the bank provided its statement that they would
never take up any actions that would instigate any crime. This issue had been bought in the court
by AUSTRAC, which states that the company had failed and the bank had been reported to
indulge in suspicious matters and made a transaction of over A$77 million. The agency alleged
that 53,700 contraventions of laws related to counter-terrorism and anti-money laundering laws
had been made by the bank with respect to the intelligent deposit machines. A maximum penalty
of A$18 million can be imposed related to the laundering of money and counter terrorism8.
AUSTRAC stated that in situation where it is obvious for the machines in being used for
the money laundering activities, the bank did not take up necessary steps in mitigating and
managing the risks. AUSTRAC alleged that the machines were being used by four money
7 CBA will take months to answer money laundering allegations. (2018). ABC News. Retrieved 3 January 2018,
from http://www.abc.net.au/news/2017-09-04/commonwealth-bank-will-take-months-to-respond-to-austrac/
8869706
8 Knaus, C. (2018). Commonwealth Bank accused of money laundering and terrorism-financing breaches. the
Guardian. Retrieved 3 January 2018, from
https://www.theguardian.com/australia-news/2017/aug/03/commonwealth-bank-accused-of-money-laundering-and-
terrorism-financing-breaches

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laundering syndicates that were related to the import and distribution network of drugs. These
machines have been used by the syndicates in transferring and depositing the cash that were of
lower amount so that the suspicion can be kept at a minimum. One such incidence of money
laundering had involved a transfer of 21 million, which was deposited in 11 CBAs and came
mostly through the intelligent machines. The bank failed in taking action even after they were
warned by the Australian Federal Police. ASIC keeps an eye on the duties and affairs of the
corporate organizations. The main work of ASIC is to integrate the corporate regulations,
provide financial services and keep control of the credit and market regulators in Australia. The
primary vision of the institution is that it helps in allowing funds, which will trigger the growth
of the economy. It also promotes the level of confidence and trust among the investors so that it
can ensure efficiency by providing proper registration services. It helps in providing orders like
financial penalties and the suspension of directors if any violation has been registered in their
name. The directors of CBA were not able to take proper care with respect to the affairs within
the company9.
Section 180 (1) of the Corporation Act 2001 (Cth) instructs the officers and the directors
to provide proper care and diligence with respect to the work that is being carried out in the
organization. In this case, it can be seen that the company has indulged in violating the legal
provisions, as the directors have violated the provisions laid under 180 (1) of CA. This is due to
the fact that the reasonable directors will not indulge in any kind of violation against the anti-
money laundering and counter-terrorism laws. Under the provisions laid down in civil penalties,
they can be made liable in a personal manner by allowing them to pay the financial liabilities and
9 CBA faces 'very large' shareholder action on money laundering. (2018). ABC News. Retrieved 3 January 2018,
from http://www.abc.net.au/news/2017-08-23/commonwealth-bank-faces-shareholder-class-action/8833860

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being suspended from managing the affairs of the company under section 1317E and 206C of the
CA.

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Reference List
ASIC v Cassimatis (No 8) [2016] FCA 1023
Australian Securities & Investments Commission [ASIC] v Lindberg [2012] VSC 332
CBA faces 'very large' shareholder action on money laundering. (2018). ABC News. Retrieved 3
January 2018, from http://www.abc.net.au/news/2017-08-23/commonwealth-bank-faces-
shareholder-class-action/8833860
CBA will take months to answer money laundering allegations. (2018). ABC News. Retrieved 3
January 2018, from http://www.abc.net.au/news/2017-09-04/commonwealth-bank-will-take-
months-to-respond-to-austrac/8869706
Corporation Act 2001 (Cth)
Knaus, C. (2018). Commonwealth Bank accused of money laundering and terrorism-financing
breaches. the Guardian. Retrieved 3 January 2018, from https://www.theguardian.com/australia-
news/2017/aug/03/commonwealth-bank-accused-of-money-laundering-and-terrorism-financing-
breaches
Our role | ASIC - Australian Securities and Investments Commission. (2018). Asic.gov.au.
Retrieved 3 January 2018, from http://asic.gov.au/about-asic/what-we-do/our-role/