Bendigo and Adelaide Bank Faced with Penalties Over Money Laundering Charges
The Bendigo and Adelaide Bank, a prominent Australian financial institution, is currently facing significant penalties and potential further sanctions. These repercussions follow the recent discovery of suspected money laundering activities at a Bendigo branch in Melbourne. The bank admitted to these allegations in late November, although the activities were detected earlier in the year.
Regulatory Actions Taken Against the Bank
The Australian Prudential Regulation Authority (APRA) and the Australian Transaction Reports and Analysis Centre (AUSTRAC) both announced actions against Bendigo Bank. The purpose of these actions is to address identified weaknesses in the bank’s risk management practices and culture, specifically with regard to money laundering.
Investigation by Deloitte
An independent review of the suspected money laundering was conducted by Deloitte, a global professional services network. The bank’s board commissioned this review a few months prior to the findings being reported to AUSTRAC. The review found substantial shortcomings in Bendigo Bank’s approach to identifying, mitigating, and managing money laundering and terrorism financing risk.
APRA expressed its concern that the weaknesses identified during the investigation could be applicable across the bank’s operations more broadly. AUSTRAC echoed these concerns, reflecting a shared understanding of the severity of the situation.
Future Requirements for Bendigo Bank
APRA will require Bendigo Bank to undertake a comprehensive root cause analysis to understand the extent of non-financial risk management issues at the bank. This analysis will extend beyond money laundering and terrorism financing to ensure a thorough examination of the bank’s practices.
Additionally, APRA will require Bendigo Bank to hold an operational risk capital add-on of $50 million. This capital add-on will remain in place until the bank has completed remedial measures and addressed wider concerns to APRA’s satisfaction.
Enforcement Investigation by AUSTRAC
AUSTRAC has initiated an enforcement investigation to examine whether Bendigo Bank has complied with its obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act).
Impact on Bendigo Bank’s Financials
The additional capital charge is expected to reduce the bank’s Level 2 Common Equity Tier 1 ratio by approximately 17 basis points, according to Bendigo Bank. This indicates a substantial financial impact on the bank’s operations.
Response from Bendigo Bank’s CEO
Richard Fennell, CEO of Bendigo Bank, acknowledged the need to intensify the bank’s focus on improving its risk capability and strengthening its risk culture. He stated that the board and executive are fully committed to enhancing non-financial risk maturity. The bank will provide cost estimates to the market once they are determined.
The recent events involving Bendigo Bank serve as a reminder of the importance of robust risk management practices in the banking industry. With regulatory bodies taking swift action to address money laundering and other illicit activities, banks must ensure their operations are compliant with all relevant laws and regulations.
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