Information System Evaluation of CBA's AML/CTF Compliance Issues

This case study examines the Commonwealth Bank of Australia's (CBA) breaches of anti-money laundering and counter-terrorism financing laws, stemming from issues with their Intelligent Deposit Machines (IDMs) and inadequate IT governance. The report analyzes the competitive methods employed by CBA, the causes of the AML/CTF breaches, and the application of COBIT 5 components to address these issues. It also explores hardware and software problems, the potential of agile methods for prevention, and the role of data warehousing in mitigating future breaches. The report recommends improvements in IT governance, security, and the implementation of IDM operations, emphasizing the importance of ethical considerations and security measures in information technology. Ultimately, it concludes that CBA needs to prioritize these aspects to avoid similar issues in the future.

Running Head: INFORMATION SYSTEM FOR BUSINESS PROFESSIONALS
INFORMATION SYSTEM FOR BUSINESS PROFESSIONALS
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Executive summary
Purpose
The purpose of the report to help in responding to the case study question based on
the issues faced by the Commonwealth Bank in Australia. In this context, the report aims to
provide a sustainable recommendation for the information system related requirement of the
organisation.
Findings
Findings show that Commonwealth Bank of Australia is facing major issues related to
the breach of Anti Money Laundering and counter-terrorism financing Act. To be specific, it
has been found that the problems that occurred were due to insufficient measures against the
anti-money laundering activities. The main reason for this breach was due to the fact that they
did not fulfil the obligation to immediately report the suspicious transaction to the financial
intelligence unit. Apart from these, it has been found the company had poor practices of IT
governance and Information system as a result which they had faced such major issue.
Recommendations
Through an analysis of the findings, it has been found that some improvements are
required in their IT governance and information system related to security with the
development of IDM operations for reporting this future issue. This could be done by using
the COBIT 5 framework of IT governance that will provide the organisation with an idea
associated with IT issues. Moreover, the use of agile technology has been recommending for
improving customer satisfaction and to provide the best management over financial
transactions.

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Conclusion
Lastly, it has been concluded that while implementing the information system into the
operations, CBA needs to care about the ethical and security issues in information technology
and needs to be careful in dealing with them.

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Table of Contents
Introduction................................................................................................................................4
1. Justification for CBA rolled out the Intelligent Deposit Machines (IDMs). The business
advantages that the IDMs offered..............................................................................................5
Competitive methods that the CBA were following and any relevant competitive forces....5
2. Occurrence of AML/CTF breaches........................................................................................6
3. Application of four CoBIT components that are most relevant to the AML/CTF breaches..7
4. Problems in the hardware and software that gave rise to the breaches..................................8
Problems in software..............................................................................................................8
Problems in hardware.............................................................................................................8
5. Agile methods and strategies other than agile methods to prevent the issue.........................9
Information system...............................................................................................................10
Supporting business process and functions..........................................................................12
Supporting business decision...............................................................................................12
Ethical issues and security....................................................................................................13
6. The ways by which Data warehouse could have been used to mitigate the breaches.........14
Recommendations....................................................................................................................15
Conclusion................................................................................................................................17
Reference list............................................................................................................................18
Appendix..................................................................................................................................22
Appendix 1: Money laundering issue...................................................................................22

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Introduction
Information system nowadays has turned in to the fundamental tools for every
organisation. Information’s system can be illustrated as a computerised orientation that
involves human objects and extensive computing operations with a goal to translate
information. Being the feature of operation support system and management associated
system, it is needed to be updated and continuously improved. The main role of the
information system within the company is to assist the business process and operations,
decision making of the managers and develop strategies to improve the competitive edge of
the organisation. For an organisation such as the Commonwealth Bank of Australia, they
need a renewed and standard information system to govern their IT operations.
The information system can be placed in the case study of Commonwealth Bank, as
the organisation faced major charges of breach of anti-money laundering and counter-
terrorism financing activities. In this context, the Sydney police found almost $3million in
banking recipients, among them some of which were printed by CBA deposit machines.
These issues were due to the lack of inadequate IT governance and improper information
system operations.
In this context, the aim of the study is to provide answers to the questions of the case
study by establishing the understanding of information system knowledge to help CBA to
deal with anti-money laundering issue. The study will be emphasising on major areas of
information system in evaluating the important role in CBA operations. Based on this the
report will be providing valuable suggestions to deal with the issue.

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1. Justification for CBA rolled out the Intelligent Deposit Machines (IDMs).
The business advantages that the IDMs offered.
According to Hutchens (2018), increasing preferences for cashless ATM transaction
is an essential factor that driving the growth of intelligent cash deposit machines in the
market. Financial organisation are consistently focusing on the up gradation of their ATM
settings to improve the security as well as convenience to deliver a personalised system of
banking to their customer.
Considering the advantages the company used this deposit system, but their money
laundering issue took place owing to problems in this process. Moreover, due to the rise in
the number of bank accounts and functions such as one-time access code, with the expansion
of banking channels are the potential triggers of intelligent cash deposit system (Thompson et
al. 2015).
Competitive methods that the CBA were following and any relevant competitive forces
This is an advanced foundation of information technology that is used by CBA. This
system has helped the bank in rolling out IDM's by reducing the cost and deposit more than
$1.24 million of counter cost (Hutchens, 2018). The company believed that this system will
help them to enhance the customer relationship with an effective accessibly of accounts.
The acquisition method is the primary reason and the method followed by Common
wealth Bank for installing information. They used different accounting software such as
XERO, MYOB that are cloud software used by them to address competitive forces in the
market. The major features of these software’s were to track inventory, purchase order
management and management of tax.

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2. Occurrence of AML/CTF breaches
In August 2018 Austrac declared that it has decided to sue CBA for 53,700 charged
breached of money laundering and counter-terrorism financing laws. The case is associated
with CBA's use of intelligent deposit machines that is a type of machines introduced in the
year 2012 that allows the consumers to anonymously deposit as well as transfer cash
(Commbank.com.au 2018).
The investigation undertaken by the federal government, NSW police and Western
Australia police reported that these machines were being used by CBA for money laundering
in illicit proceeds of committing a crime. However, CBA has agreed to pay a civil fine of
$700 million and Austrac’s legal cost of $2.5 m for resolving the case. The organisation has
originally offered an estimated fine of $375 m (Commbank.com.au 2018).
The share price of the bank jumped from $68.70 to $70.23 after the announcement of
the penalty. The company also accepted that they failed this due to lack of appropriate
examination of money laundering and terrorist financing risk of its intelligent deposit
machines. The company failed to introduce a proper system of control to resolve and manage
the risk in IT governance and financial reporting system. In addition to this, the company
admitted that they did not comply with the necessities of its anti-money laundering and
counter-terrorism issues associated swath supervising transactions on almost 778,370
accounts (Molla et al. 2014).
These are the major findings from the case study of Commonwealth Bank that asserts
it is not just the issue of money laundering and counter-terrorism but the lack of proper
information's system operation that lead the company to make such a blunder.

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3. Application of four CoBIT components that are most relevant to the
AML/CTF breaches.
As stated by Sadgrove (2016), effective governance within the organisation is
necessary for the successful adoption and functions of Information within the organisation for
developing the functions. In this context, the IT is needed to be built in accordance with the
requirement of the organisation. The IT system needs to be developed on the basis of
organisational governance with COBIT 5 framework (García-Holgado et al. 2015). In this
regards, organisations are required to evaluate and comply with the legal standards while
utilising technology within the organisation.
As stated by Haworth (2016), the major aim of COBIT framework is to offer
administration and business operations with an effective IT governing set up that addressing
in offering a standard form of information technology and help them in dealing with the risk
issues. In addition to this, COBIT framework provides a direction on t most of the effective
method to sort issues that take place in terms of IT operations. According to Gillingham, P.
and Graham (2016), the operating model of COBIT helps an organisation to identify all kinds
of activities associated with IT operation so that they can use and understand the processes.
Apart from these, COBIT 5 also provides supportive guidelines on each step that are
needed to be done that results in effective performance of the organisation (Breese et al.
2015). Therefore, this system of IT framework will help Commonwealth Bank to set up a
meaningful objective. Alongside this feature, this will also help them in bringing maturity in
processes by enabling them to access the level of maturity of every transaction that is made.

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4. Problems in the hardware and software that gave rise to the breaches
Problems in software
The cloud based and web based software used by them had several problems and
security issues. The private information stored in the software is limited since web based and
cloud based software are prone to hacking. Apart from these, the company had major
loopholes due to the lack of expertise employees to use this software and implementation of
this software required high cost investment.
As stated by Chugh et al. (2016), this stores data could not be retrieved at any point of
time whenever required. An immediate access to data could have helped CBA’s issues on
security transaction. In addition to this, the manager of the organisation was not able to use an
online transaction in which they will be able to connect with their customers electronically.
Problems in hardware
The company did not install proper financial software that was in line with the size of
the organisation, software that secure. The company lacked effective control planning system,
as a result of which they did not have any skilled employees to manage the system, and
software that could provide technical assistance to the employees.
However, this will likewise offer efficient service to their customers and thus will
provide high security to their suspicious financial system (Gonzálvez-Gallego et al. 2017).
The combination of this system will offer high advantages on their reporting system and in
obtaining upgraded data thereby evaluating them at all levels of management.

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5. Agile methods and strategies other than agile methods to prevent the
issue
According to Reijers et al. (2015), Agile software development is an umbrella term
for a group of process and activities that are generally based on values and guidelines
expressed through the agile process. In this process, the solution evolves through
collaboration in between self-organisation and cross functions in between groups while using
the suitable practices within the organisation. Sun et al. (2017) state that agile processes are a
practice that helps to promote continuous iteration of development and test throughout the
system of software development lifecycle.
According to Duffield and Whitty (2015), it is an agile process that helps in the
incremental as well as an iterative approach to the development of software design. These
systems are suitable information system for Commonwealth Bank. The business organisation
is in utmost need of this system for satisfying the problem faced by the organisation and
thereby leading them in making effective decisions.
The agile system of technology not provides effective results and customer retention
but also helps in providing the best control system over the financial transaction. Unlike the
traditional system of technology, the agile process helps to meet the requirement in case of
delayed projects (Antonius et al. 2015). However, the method is needed to be used in
accordance with the relevant shape and size of the organisation. The user interface of the
agile technology helps to make the interface easily understandable and operate-able.
Apart from this, the system is most recommended for CBA as it helps to deliver a
better system of control and will allow them to make changes as per requirements. Hasan et
al. (2017) argue that agile software development is the latest technologies, therefore, there
may be some breaches while using the agile operations. Therefore, the commonwealth bank

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before using this needs to have launched the limit to their system like a maximum deposit to
restrict limitless transaction.
Information system
As stated by Molla et al. (2014), the information system is consistently changing and
growing with the advancement of technology. Information’s system has established as the
crucial source for managing a modern organisation for all small and large enterprises. In the
current period business environment is unstable, inactive and turbulent in nature with the
increasing demand for accurate, all-inclusive and sensible financial information that is
required for progressing towards effective decision making.
As stated by Alotaibi and Liu (2017), the information system of technology can be
illustrated as the mixture of software, hardware, physical settings and financial operations of
the organisation that help in control planning, synchronisation and decision making of the
management operations. Additionally, information system would help as a necessary source
of change within CBA IT management, and financial reporting system in using their
resources in a proper way.