SYDNEY (BLOOMBERG) - National Australia Bank (NAB) is being investigated by the government agency responsible for financial crime for what it said were serious concerns over the lender's compliance with anti-money laundering and counter-terrorism laws.
Austrac, as the financial crimes regulator is known, wrote a letter on Friday (June 4) to NAB saying a formal investigation is under way and that it has not made any decision at this stage about whether or not to take any action, according to a statement from the bank on Monday.
The watchdog said it is not considering civil penalty proceedings at this stage. NAB said it will continue to cooperate with the investigation.
"NAB takes its financial crime obligations seriously," the bank's chief executive officer Ross McEwan said in the statement. "We are very aware that we need to further improve our performance in relation to these matters. We have been working to improve and clearly have more to do."
The bank's shares slipped 2.8 per cent as of 11.50am in Sydney. NAB may not be able to reach its cost target of A$7.7 billion (S$7.89 billion) if it is forced to pay fines, Bloomberg Intelligence analyst Matt Ingram said. The lender already boosted its compliance investment spending by 47 per cent between 2017 and 2020, compared with a 0.2 per cent increase in other costs, he said.
Austrac's decision to start a formal enforcement investigation into NAB's operations follow its successful pursuit of rivals Westpac Banking Corp and Commonwealth Bank of Australia on anti-money laundering and counter-terrorism law breaches. Westpac in September agreed to pay A$1.3 billion after it admitted to contravening the law on more than 23 million occasions. In 2018, Australia's biggest bank, CBA, was fined A$700 million after the lender admitted it had breached the law on 53,750 occasions.
NAB back in 2017 self-reported its own potential breaches of anti-money laundering regulations. Austrac's letter to NAB last week stated that the bank has invested significantly in programs to improve its financial crime risk capability, but despite this investment over an extended period, ongoing concerns remain.