Bank must hold $50 million of risk capital add-on as AUSTRAC commences enforcement investigation
Australia’s financial regulators have taken action against Bendigo and Adelaide Bank following revelations of money laundering and risk-management deficiencies at some of its branches.
An independent investigation conducted by Deloitte identified the deficiencies in November when Bendigo filed a report with AUSTRAC and law enforcement after identifying suspicious behaviours at one of its branches.
Deloitte’s review found deficiencies in the bank’s approach to identification, mitigation and management of money laundering and terrorism financing risk.
These deficiencies extended beyond the branch and into key aspects of Bendigo’s risk-management, due diligence, transaction-monitoring and customer risk rating procedures.
As a result, the Australian Prudential Regulation Authority (APRA) has ordered Bendigo to hold an operational risk capital add-on of $50 million. The capital add-on will remain in place until Bendigo has completed “remedial measures and addressed wider concerns to APRA’s satisfaction”.
Bendigo must also undertake a root cause analysis to understand the extent of non-financial risk management issues at the bank.
APRA chair John Lonsdale said: “Although Bendigo and Adelaide Bank is financially sound and comfortably above its core capital and liquidity requirements, we are concerned there may be significant gaps in its risk management framework that need to be addressed urgently.
“While the non-financial risk, anti‑money laundering spaces are a priority in light of the recent independent report, APRA is concerned that similar weaknesses may exist across the bank.
“The measures we are announcing today alongside AUSTRAC aim to ensure that fundamental deficiencies in Bendigo Bank’s risk management framework are identified and addressed and those responsible are held to account as appropriate.”
AUSTRAC, meanwhile, has commenced an enforcement investigation which will focus on whether Bendigo has complied with its obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.
AUSTRAC acting chief executive Katie Miller said: “This enforcement investigation follows supervisory engagement with Bendigo Bank and the bank’s recent disclosure of deficiencies in its approach to the identification, mitigation, and management of money laundering and terrorism financing risks.
“Our investigation will examine Bendigo Bank’s compliance with the AML/CTF Act and inform any further AUSTRAC action.”
Bendigo acknowledged the actions in a Thursday press release, with chair Vicki Carter saying: “The Bank recognises robust risk management practices are critically important to ensure the bank can continue to protect its customers and deliver on its purpose of feeding into the prosperity of customers and communities.”
Chief executive and managing director Richard Fennell added: “Bendigo Bank has taken a number of steps to improve its risk capability and strengthen its risk culture over the last 12 months however I recognise the need to intensify our focus and our efforts.”
APRA warned that further actions could be taken against Bendigo in the future.
