The agreement, which includes $2.5 million in legal fees, is subject to Federal Court approval.
If agreed by the Federal Court it will represent the largest ever civil penalty in Australian corporate history.
CBA has admitted to 53,700 breaches of anti-money laundering and counter- terrorism funding laws, bringing to an end a scandal that led to Ian Narev’s departure as chief executive.
Chief executive Matt Comym said that the settlement “brings certainty to one of the most significant issues we have faced”.
“While not deliberate, we fully appreciate the seriousness of the mistakes we made. Our agreement today is a clear acknowledgement of our failures and is an important step towards moving the bank forward. On behalf of Commonwealth Bank, I apologise to the community for letting them down.”
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Treasurer Scott Morrison said the government expected CBA would accept accountability, while applauding the efforts of regulatory authorities.
“The government expected that CBA would be taking action and accountability in relation to restoring trust,” he said.
“I think their admissions today provides an indication of CBA doing just that.
“I think CBA or any of these organisations always need to think carefully. The government, of course, can’t back away where there’s been such an egregious breach as this.”
AUSTRAC launched proceedings in August last year, claiming CBA had breached anti-money laundering and counter-terrorism-financing laws by failing to monitor tens of thousands of transactions through its smart ATM network.
The intelligent deposit machines were launched in 2012 without appropriate coding that would automatically send legally required reports for cash transactions of more than $10,000 to the regulator.
In mid-2015, AUSTRAC asked CBA for several missing transaction reports, which led the bank to discover it had failed to send the reports.
The Federal Court hearing is understood to be scheduled in the next few months.
The parties will together approach the Court with their settlement agreement.
AUSTRAC undertook their investigations with help from Australian Federal Police, NSW Police and Western Australia Police.
AUSTRAC CEO, Nicole Rose PSM said the outcome sends a strong message to the industry that non-compliance with the relevant Act would not be tolerated.
“As we have seen in this case, criminals will exploit poor business practices to launder the proceeds of their crimes,” Ms Rose said.
“This has real impacts on the everyday lives of Australians and puts the community at risk by increasing opportunities for terrorists to support attacks here and overseas, and enabling organised crime groups to peddle drugs to our families and friends.
“We know that businesses are the first line of defence in protecting the community and our financial system from criminal abuse, and it is critical for AML/CTF compliance and risk management to be embedded in business strategy and practices.
“I hope this result alerts the financial sector to the consequences of poor compliance, and reinforces that businesses need to take their obligations seriously.”