CBA Money Laundering Case Analysis

This assignment analyzes a case involving the Commonwealth Bank of Australia (CBA) accused of breaching anti-money laundering and counter-terrorism financing laws. It examines the directors' responsibilities under the Corporation Act 2001 (Cth), specifically Section 180(1), which mandates care and diligence in company operations. The role of the Australian Investment and Security Commission (AISC) in investigating the case and potential consequences for both the organization and its directors are also discussed.

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 faced by crown resorts......................................................................................................2
Role of AISC...............................................................................................................................2
Possible Remedies.......................................................................................................................3
Part B..............................................................................................................................................4
References........................................................................................................................................8

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Part A
Issues faced by crown resorts
The directors of a corporate organization have the duty to act in the best interest of the
company. Section 180(1) of the Corporation Act 2001 (Cth) instructs the directors and officers of
a company to deploy care and diligence in relation to their operation. Such care and diligence is
evaluated by appointing a hypothetical person as a director in the same situation and analyze the
reasonability in relation to the decision1. The decision has to be in the best interest of the
company. In the case of ASIC v Cassimatis2 it had been stated that any reasonable director will
not breach the law of the land in any condition. Even the shareholders do not have the power to
ratify such acts. In the given situation the directors of crown sports have violated legal provisions
by sending agents to china in order to recruit high roller gamblers where gambling is illegal in
china. In relation to such action employees of the organization have been arrested by the Chinese
government which also includes Australians. In addition there has been a 14% decline in the
shares of the organization which has subjected the company and its shareholders to major losses.
The company has also suffered reputational loss because of its actions. In the given situation the
corporate legal issues which are faced by the directors of crown resorts are in relation to the
directors duties violated by them. The directors as discussed above have breached section 180(1)
of the CA by not acting with diligence and care in relation to the affairs of the company.
Role of AISC
The Australian Investment and Security Commission is a corporate watch dog in
Australia. It has the duty to keep an eye on the affairs of corporate organizations. The AISC
1 Corporation Act 2001 (Cth) at section 180(1)
2 (No 8) [2016] FCA 1023

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regulates integrated corporate, financial services, markets and consumer credit regulators in
Australia. The vision of the commission is to allow the markets to fund economy and trigger
economic growth. The AISC has the purpose of ensuring the financial wellbeing in Australia.
The AISC promotes the confidence and trust of consumers and investors, ensures efficient and
markets and providing proper registration services. The AISC brings actions against
organizations who fail to act in an ethical and legal manner and thereby causing loss to the
investors and creditors. It seeks orders like financial penalties along with suspension of directors
in case any violation has been identified3. In the given situation where the employees of Crown
gave been arrested in china for illegal activities it is the role of AISC to investigate into the
matter. This is because such a decision by the directors may cause significant losses to the
investors and creditors of the company. In addition where any company registered with the
Australian Stock Exchange (ASX) have been accused of violating law it is the duty of the AISC
to make investigation into the matter. In case the AISC finds out that the directors of Crown have
violated their corporate duties it will seek legal actions against them in Australia.
Possible Remedies
Upon investigation if it is found by the AISC that the directors of Crown have actually
indulged in illegal activities there are several remedies which are available in relation to the CA.
violating the duties of directors provided in the CA is a civil penalty provisions. In addition the
directors can also be prosecuted under criminal liability under the criminal code as per section
6.1 if they are found to violate the provisions of section 184 of the CA which is to recklessly
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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breach the duties provided in section 180-183 of the CA. The civil penalty provisions are
provided under section 1317E of the CA4. The directors may be subjected to a financial penalty
of upto A$200, 000 in case of serious breach. In addition the directors of Crown may be
suspended from managing a corporation for a period up to 5 years under the provisions of section
206C of the CA5. The directors may also seek an alibi under section 1317G where the court may
pardon the breach committed by them in relation to their duties. However the AISC needs to
prove that the directors have committed a serious breach. In the case of Australian Securities &
Investments Commission [ASIC] v Lindberg6 the ASIC was able to obtain a suspension of 2 year
along with a financial penalty of $100,000 where the directors had violated section 180(1) of the
CA. Although the director has an outside settlement in relation to penalties the AISC had to
prove its case in the court.
Part B
The Commonwealth bank has been subjected to a big drop in its share price after
AUSTRAC has launched a case in relation to money laundering against the organization. This
may also subject the organization to a potential class action by its shareholders. AUSTRAC has
brought an allegation against the organization that they have been associated with consistent
money laundering operations by terrorist and criminal gangs. The CBA has been accused of wide
breaches in relation to Counter-terrorism financing and money laundering rules. Civil penalty
proceedings have been initiated by AUSTRAC against the company in the federal court for
“serious and systemic non-compliance”7.
4 Corporation Act 2001 (Cth) at section 1317E
5 Corporation Act 2001 (Cth) at section 206C
6 [2012] VSC 332
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

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The conduct of the CBA has subjected the Australian community to serious and ongoing
financial crime as provided by the court in filing. On the other hand it had been provided by the
bank that they would never indulge in an activity or action which would enable any kind of
crime. The issue which has been brought before the court by AUSTRAC is that there has been a
failure on the part of the bank to report suspicious matters in relation to transaction of over A$77
million. It has been alleged by the agency that 53,700 contraventions of counter-terrorism laws
and Anti- money laundering laws have been made by the bank in particular to its intelligent
deposit machines. The maximum penalties which can be imposed in relation to the anti-money
laundering and counter terrorism is A$18 million for every violation8.
It has been stated by AUSTRAC that even in situation where it was obvious that the
machines were used for suspected money laundering the bank did not take necessary steps to
mitigate and manage the risks. It has been alleged by AUSTRAC that the machines had been
utilized by four money laundering syndicates which included those associated with drug import
and distribution network. The machines had been used by the syndicates for the purpose of
depositing and transferring cash at low amounts which would keep suspicion at bay. One of the
money laundering activities involved more than 21m deposited into 11 CBAs which mostly
came through intelligent machines. The bank allegedly failed to take any action even after been
provided with warnings by the Australian Federal police. The Australian Investment and
Security Commission is a corporate watch dog in Australia. It has the duty to keep an eye on the
affairs of corporate organizations. The AISC regulates integrated corporate, financial services,
markets and consumer credit regulators in Australia. The vision of the commission is to allow the
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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markets to fund economy and trigger economic growth. The AISC has the purpose of ensuring
the financial wellbeing in Australia. The AISC promotes the confidence and trust of consumers
and investors, ensures efficient and markets and providing proper registration services. The
AISC brings actions against organizations who fail to act in an ethical and legal manner and
thereby causing loss to the investors and creditors. It seeks orders like financial penalties along
with suspension of directors in case any violation has been identified. It has been provide that the
directors of CBA have not been able to take proper care in relation to the affairs of the company9.
As discussed above the directors of a corporate organization have the duty to act in the
best interest of the company. Section 180(1) of the Corporation Act 2001 (Cth) instructs the
directors and officers of a company to deploy care and diligence in relation to their operation.
Such care and diligence is evaluated by appointing a hypothetical person as a director in the
same situation and analyze the reasonability in relation to the decision. The decision has to be in
the best interest of the company. In this case as the company has indulge in violation of legal
provisions its directors have also violated the provisions of section 180(1) of the CA. this is
because a reasonable director would not indulge in actions which are in violation of anti-money
laundering and Counter-terrorism laws. In the given situation is the role of the AISC to
investigate the issue. Along with the organization itself the directors would also be subjected to
prosecution because of the breach of directors duties committed by them. Under the civil penalty
provisions they may be made personally liable for the paying financial penalties along with being
suspended for managing the affairs of the company under section 1317E and 206C of the CA.
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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References
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/