|Commonwealth Bank's Headquarters in Darling Harbour, Sydney|
ControversyThe ethics case in question is a series of allegations against an Australian financial giant - Commonwealth Bank. The allegations pertain to CommBank disregarding certain laws associated with requiring banks to monitor their transactions to ensure that criminals do not use their systems to launder ill-gotten gains. It is expected of Australian financial companies that money flowing through their systems be continuously monitored and any suspicious activity reported to regulatory bodies, in this case Australia's Transaction Reports and Analysis Centre (AUSTRAC) in line with the
Anti-Money Laundering and Counter-Terrorism Financing Act of 2006 and the Financial Transaction Reports Act of 1998 (Australian Transaction Reports...). The case largely began mid 2012 when CommBank rolled out their IDMs (intelligent deposit machines) without conducting necessary risk assessments in advance as required by law. AUSTRAC alleges that criminal syndicates used the cash machines to anonymously deposit money into CommBank accounts since the machines did not require an identity as to who the person depositing the money is ("Commonwealth Bank Faces..."). Thus using a combination of fake names, offshore transferring schemes, and CommBank accounts (on those names), five criminal syndicates were able to launder their ill-gotten proceeds. Only in 2015 did CommBank conduct a risk assessment but nine billions dollars worth of money had already flowed through the machines.
|A Motivational CommBank Ad|
On the other end, apart from conducting a risk assessment, laws required CommBank to continuously monitor transactions anyway and report suspicious transactions to AUSTRAC putting holds on accounts if necessary and further proceeding with due diligence. AUSTRAC claims that CommBank was negligent in these matters as well. Between October 2012 to late 2016, allegations include that CommBank had gaps in transaction monitoring on 778,370 accounts. Moreover, AUSTRAC alleges that between November 2012 and September 2015, suspicious transaction reports on 53,506 transactions were not filed, the value of those transactions being about 625 million Australian dollars. Apart from not filing, AUSTRAC alleges that CommBank did not adequately investigate those transactions and take further action when it was needed (Marsic). Overall, the case began in late 2011 and was distributed over the next six years until AUSTRAC filed suit in August 2017 ("Commonwealth Bank Accused...").
In response Commonwealth's CEO, Ian Narev, admitted to the media about mistakes being made, and plans were enacted regarding his resignation (Williams).
|Ian Narev, CommBank's CEO|
StakeholdersThe stakeholders in this case are those affected by this ethics case. First of all this includes the executives of CommBank as well as senior figures in the compliance/general counsel department - those people who could have avoided the whole scandal by wielding their influence to comply. Employees and customers of CommBank are also stakeholders since they are affected by the negative publicity surrounding the scandal. People want to work for and keep their money in companies that do the right thing. Shareholders are affected because this scandal is projected to negatively affect CommBank's earnings and thus stock price.
Law enforcement was also affected by this scandal because if CommBank filed suspicious transaction reports on time, it would have been easier for officials to collect information and apprehend those criminal syndicates. In this regard, the people of Australia are also stakeholders because they have been exposed to money-laundering syndicates when compliance with law enforcement on behalf of CommBank could have reduced that exposure. The criminal syndicates are stakeholders because they wanted to take advantage and launder their money, being successful to some extent in this case. Finally, other competitor financial companies are also stakeholders because after this case, regulation could be increased overall.
IndividualismAccording to Friedman’s Individualism (also called the Economic Theory), it is required that businesses maximize profits but do so within the confines of the law. Otherwise they would be acting unethically because they would be operating outside of limits placed by laws, or on the other hand, if profits were not maximized within legal confines, the business would in essence be stealing from shareholders since the it would not be giving back to the shareholders as much as it could be (Desjardins).
|Milton Friedman - proponent of|
|Emmanuel Kant - Proponent|
allegations give the appearance that CommBank was not very concerned about all the transactions monitoring laws but rather about having people deposit more money at their bank - a means to make more money (the end). If they were concerned with how that money was made, some of those suspicious means would be further investigated and reported to AUSTRAC, even at the expense of losing out on gains. Clearly by the Formula of Humanity, CommBank's actions were not coming from the goodwill so the actions are impermissible. The Formula of Universal Law is also in agreement with this conclusion since universalizing CommBank's actions leads to universal inconsistency - if every bank were to evade transaction monitoring violations then financial crime would become rampant.
UtilitarianismThe utilitarian viewpoint on business decisions, unlike Kantianism, does not concern itself with what is the right thing to do based on ideas of what is defined as right or wrong, but rather on maximizing happiness, no matter the action. Thus, it is necessary to identify all the stakeholders involved and to evaluate how their happiness was affected or will be affected by the action – an imprecise task of course (Desjardins).It can be supposed that the happiness of the CEO and other executives/general counsel was higly decreased due to all of the bad publicity. Narev is resigning when he could have continued as CommBank's CEO for more years to come if the right thing was done. The happiness of regular employees and customers was decreased because they are now less proud of the organization that they may have previously trusted and were proud about. Shareholders are certainly not happy since CommBank fines are estimated to be in the millions of dollars (Stewart) which will negatively affect the financial condition of CommBank and already has negatively affected stock price with stock value falling by 14% since AUSTRAC released the allegations ("Commonwealth Bank Accused..."). Law enforcement is certainly very unhappy because the delay in filing suspicious transaction reports amounted to footage as well as other evidence being lost, making law enforcement a harder task (Marsic). As was already mentioned, this also reduced the happiness of the public because the realization is that the public was exposed to crime that could have been prevented/apprehended. The "happiness" of other financial institutions was reduced because now AUSTRAC could be eying other institutions supiciously which is unfair to those organizations who operating within the law. It appears that since this case brought so much unhappiness to everyone (except to the criminal syndicates who had an easier task to launder the money due to CommBank's actions) a utilitiarian would conclude that CommBank's actions were impermissible because they brought more unhappiness than happiness.
|Aristotle - Proponent of Virtue Theory|
Australian Transaction Reports and Analysis Centre. n.d. 20 3 2018. <https://www.australia.gov.au/directories/australia/austrac>.
Burgess, Matthew. "CBA Admits Some Claims, Denies Others in Money Laundering Case." 13 12 2017. Bloomberg.com. 2 3 2018. <https://www.bloomberg.com/news/articles/2017-12-13/commonwealth-bank-admits-to-some-austrac-claims-contests-others>.
"Commonwealth Bank Accused of More Anti-Money Laundering Law Breaches." 14 12 2017. theguardian.com. 2 3 2018. <https://www.theguardian.com/australia-news/2017/dec/14/commonwealth-bank-accused-of-more-anti-money-laundering-law-breaches>.
"Commonwealth Bank Faces Fines Over Anti-Laundering Laws." 3 8 2017. bbc.com. 2 3 2018. <http://www.bbc.com/news/business-40810382>.
Desjardins, Joseph. An Introduction to Business Ethics. New York: McGraw-Hill, 2014.
Marsic, Sonja. "Concise Statement." 3 8 2017. AUSTRAC. 20 3 2018. <http://www.austrac.gov.au/sites/default/files/20170803-concise-statement-cba-s.pdf>.
Salazar, Heather. "Kantian Business Ethics." Vaidya, Anand, Fritz Allhoff and Alexander Sager. Business in Ethical Focus. Broadview Press, 2016.
Salazar, Heather. The Case Manual. n.d.
Stewart, Robb M. "Australian Regulator Deepens Compliance Case Against Commonwealth Bank." 14 12 2017. wsj.com. 2 3 2018. <https://www.wsj.com/articles/australian-regulator-deepens-compliance-case-against-commonwealth-bank-1513238373>.
Williams, Jacqueline. "Commonwealth Bank Chief to Quit Amid Money-Laundering Scandal." 14 8 2017. newyorktimes.com. 2 3 2018. <https://www.nytimes.com/2017/08/14/business/australia-commonwealth-bank-money-laundering.html>.