The Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd (ASX: NAB) share prices could be hit by regulator action.
What’s going on?
According to reporting by the Australian Financial Review, the two major ASX banks are under the spotlight in relation to anti money laundering laws after an investigation into one of their partners is expected to result in sanctions being imposed in PNG.
ASX-listed BSP Financial Group Limited (ASX: BFL) could be hit with fines or regulatory action in PNG for breaches of the country’s anti-money laundering laws.
It could be troublesome for both CBA and NAB because they are meant to do regular due diligence assessments on correspondent banks to make sure they’re not assisting money laundering. BSP clients use these two big ASX banks to transfer money in and out of Australia.
The AFR quoted the two banks’ response to questions about this matter.
CBA said: “We have processes and controls in place to ensure we meet all our legal and regulatory obligations. They ensure we address these risks across all of our banking services, including correspondent banking.”
NAB also declined to comment specifically on the matter, saying that it conducted regular due diligence on its clients and took its crime obligations seriously. The bank also said: “We have an important role in monitoring and reporting suspicious activity and keeping Australia’s financial system safe“.
What does this mean?
It’s still early days on this news story, so it could be some time before anything happens regarding the major ASX banks (if at all).
But remember, regulators are being more active in making sure that banks are doing the right thing when it comes to anti money laundering and counter terrorism financing (AML and CTF).
A few years ago, CBA was hit with a $700 million fine for not doing the right reporting for transactions. Getting AML and CTF wrong can be very costly for banks.
Banks are seeing more pressure and fines in recent years, which is one of the main reasons why I’m not looking at them for my portfolio.
