National Australia Bank Ltd told shareholders on Wednesday it had self-reported shortcomings in its anti-money laundering systems to authorities, another blow just a day after regulators filed a lawsuit against the bank over fee charges.
The disclosure at NAB’s annual general meeting lights the fuse on a potential new scandal just weeks after financial crime watchdog AUSTRAC sued larger Westpac Banking Corp alleging millions of payments in breach of money laundering law.
“We have reported to AUSTRAC that we have had some shortcomings,” NAB chairman Philip Chronican told the meeting in Sydney, adding that the bank had upgraded its systems.
Chronican later told reporters that he was not aware of any impending action from AUSTRAC “but we really won’t know until we have fixed those issues.”
The shortcomings were “not of the scale reported in other organisations”, Chronican added, without naming Westpac, the country’s 2nd largest bank, or giving further detail.
AUSTRAC last month filed a bombshell lawsuit against Westpac accusing it of enabling 23 million payments which violated money laundering laws, including payments between known or suspected child exploiters. The CEO has quit and the chairman has brought forward his retirement, as analysts brace for a A$1 billion ($679 million) plus fine.
That case had prompted questions about whether other banks might face similar action.
No.1 lender Commonwealth Bank of Australia was accused by AUSTRAC in 2017 of 53,000 breaches of money laundering laws, resulting in a record A$700 million fine.
“The message we have had from AUSTRAC is that we are not going to be measured to a perfect standard,” Chronican told reporters. “We are going to be measured to a standard that we fix things when we find them and that we put the energy and resources into fixing it and we show the right attitude towards resolution of the issues.”
NAB, the country’s no. 3 lender, has already borne the brunt of the fallout from an excoriating public inquiry into the finance sector last year that found widespread misconduct.
Wednesday’s AGM was the first for Chronican and CEO Ross McEwan in their new roles, after they replaced the former CEO and chairman this year. Their predecessors were singled out by the inquiry for appearing to evade responsibility for charging customers fees without provinding a service.
Chronican and McEwan avoided an embarrassing “second-strike” against the bank on executive pay by cutting salaries and bonuses in advance. Under Australian financial laws, if shareholders vote against a company’s remuneration report for two years running, the entire board can be vacated.
The day before the AGM, Australian Securities and Investments Commission (ASIC) filed a lawsuit accusing NAB of inappropriately taking fees from financial planning customers nearly 9,000 times in the six years to February.
The regulator did not disclose how much it wanted to fine the bank but penalties could theoretically total up to A$9.75 billion ($6.62 billion), according to figures it provided, equating to about one-eighth the company’s market value.
Chronican told the meeting figures given by the regulator added up to a hefty fine but most of the wrongly charged fees affected just a few hundred customers, so “while it’s possible to extrapolate and get a very large penalty based on the law, the substance of what’s being alleged is materially less.”
The company had not set aside any cash for the lawsuit but had allocated money to reimburse wrongly charged customers, he added. The bank has previously said it set aside A$2.09 billion.
NAB shares closed down 0.7%, while the broader market was flat.