ASX 200 bank shares fall as AUSTRAC says risk of criminal activity is ‘high’

ASX 200 bank shares such as the Commonwealth Bank of Australia (ASX: CBA) are in the spotlight after financial regulator AUSTRAC found Australia’s big 4 banks were at “high” risk to money laundering and terrorism financing activities.

At the time of writing, the CBA share price is $100.67 – down 1.15%, Westpac Banking Corp (ASX: WBC) shares are $25.68 – down 1.31%, the National Australia Bank Ltd (ASX: NAB) share price is $28.43 – down 0.94%, and Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares are $27.68 – down 0.68%.

Let’s take a closer look at today’s news.

‘There have been significant and systemic deficiencies detected’

In what may be driving a mass exodus from ASX 200 bank shares today, AUSTRAC, the federal government agency responsible for tracking financial crimes such as money laundering and terrorism funding, concluded a risk assessment into the susceptibility of Australia’s big 4 banks to facilitate these crimes.

It found the banks were at a high risk overall. The threat of money laundering was rated as high while the potential risk of terrorism funding activities was seen as a medium.

Concerningly, the regulator found Australia’s big 4 banks are at the highest possible levels of vulnerability to these risks. AUSTRAC cited large customer bases, high exposure to cash, and ‘very high’ exposure to foreign jurisdictions as reasons for this rating.

As well, AUSTRAC considers consequences for customers, the financial system, and national security would be ‘major’ if these criminal activities were to occur.

According to the report:

“…there have been significant and systemic deficiencies detected in the subsector over recent years. Governance and assurance around [money laundering and terrorism financing] compliance has been identified as a particular concern, and risk mitigation strategies are not always applied consistently across a reporting entity.”

It seems investors may also be quite concerned by these findings, judging by the declines in ASX 200 bank shares on Monday.

What did AUSTRAC say?

AUSTRAC CEO Nicole Rose urged Australia’s big 4 to take these risks seriously.

“Criminals will exploit any gaps and use sophisticated methods for their own personal greed,” Ms Rose said.

“We are navigating a rapidly changing financial system and advances in technologies and platforms. That is why government, law enforcement and the finance sector must continue to work together to protect Australia’s financial system and Australians from serious and organised crime.”

ASX 200 bank shares snapshot

Over the past 12 months, ASX 200 bank shares have all overperformed the S&P/ASX200 Index. These shares have risen anywhere from 50% – 63% during this time. Meantime, the ASX 200 is 25% higher over the last 52 weeks.

The post ASX 200 bank shares fall as AUSTRAC says risk of criminal activity is ‘high’ appeared first on The Motley Fool Australia.

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• Is the CBA (ASX:CBA) share price a buy for the 6% dividend yield?

Motley Fool contributor Marc Sidarous owns shares of Westpac Banking Corporation. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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