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APRA and AUSTRAC have both announced actions to address weaknesses in Bendigo and Adelaide Bank’s (Bendigo Bank) money laundering risk management, non‑financial risk management practices and risk culture.

It follows the findings of an independent review undertaken by Deloitte into suspected money laundering at a Bendigo Bank branch, which the bank reported to AUSTRAC. This independent review found significant deficiencies with Bendigo Bank’s approach to the identification, mitigation and management of money laundering and terrorism financing risk.

APRA is concerned that the weaknesses identified by that investigation may be applicable across the bank’s operations more broadly. AUSTRAC shares APRA’s concerns.

As a result, APRA and AUSTRAC are today announcing the following actions, which are coordinated to ensure Bendigo Bank intensifies its efforts to strengthen its non-financial risk management systems and practices:

• APRA will require Bendigo Bank to undertake a root cause analysis to understand the extent of non-financial risk management issues at the bank, going beyond money laundering and terrorism financing;
• APRA will require Bendigo Bank to hold an operational risk capital add-on of $50 million; and
• AUSTRAC has commenced an enforcement investigation which will focus on whether Bendigo Bank has complied with its obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act).

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 Acting CEO Katie Miller said AUSTRAC has been closely monitoring Bendigo Bank’s compliance with its AML/CTF obligations.

“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,” Ms Miller said.

“Our investigation will examine Bendigo Bank’s compliance with the AML/CTF Act and inform any further AUSTRAC action.”

The capital add-on will remain in place until Bendigo Bank has completed remedial measures and addressed wider concerns to APRA’s satisfaction.

Today’s actions do not preclude further actions from being taken by the agencies in the future.