Looking to buy CBA shares? Here's the latest on the bank's class action

Will the CBA share price survive the company's time in court?

| More on:
Young professional person providing advise to older couple.

Image Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The start of a class action lawsuit was heard on Monday, alleging CBA destroyed shareholder value by not reporting anti-money laundering breaches to government agencies
  • The CBA is denying that it had an obligation to report these events
  • A lawyer representing the plaintiffs claimed CBA made 53,506 contraventions of the Anti-Money Laundering and Counter-Terrorism Financing Act over three years

The Commonwealth Bank of Australia (ASX: CBA) share price closed higher today despite the company being accused of "law-breaking on a grand scale" in a class action lawsuit brought against it.

Shares of the big-four bank ended the day up 1.36% at $104.48 each.

CBA's share price performance might have been helped by the fact the S&P/ASX 200 Financials Index (ASX: XFJ) was also up for the day, by 1.02%.

Let's cover the highlights of the class action lawsuit against the ASX bank share.

The lawsuit

The Age reported that Maurice Blackburn and Phi Finney McDonald are suing CBA on behalf of affected shareholders after the bank agreed to pay a $700 million fine to settle a case with financial intelligence agency AUSTRAC in 2017.

The article notes the CBA share price dropped more than 5% amid AUSTRAC announcing it would pursue the bank for allegedly breaching money laundering laws, which saw criminals launder money through its ATMs.

The lawsuit claims CBA knew about these cash deposits being made at its ATMs but did not report them to the agency, nor the ASX, thus allegedly breaching its continuous disclosure obligations and consequently destroying shareholder value amid its share price dropping lower.

Meanwhile, the CBA is denying these claims, stating that it did not need to disclose these developments to the market as they were not price-sensitive.

A spokesperson for the bank said CBA vigorously denies the allegations and is defending the actions.

What happened this week

The first hearing for the case was held on Monday, with Maurice Blackburn's lawyer Jeremy Stoljar stating that CBA broke the Anti-Money Laundering and Counter-Terrorism Financing Act a massive number of times over three years.

Stoljar said:

The issue is, is this information of the kind that would or would be likely to influence investment decisions? Well, of course it would. Look at the sheer number of contraventions: 53,506 contraventions is, objectively, a very large number to say the least. It's law-breaking on a grand scale.

Stoljar continued:

It had continued for a long period of time indicating ongoing and systemic failing. It increased the cost of doing business involving remediation, persistent costs and potentially civil penalties.

Stoljar then showed the court an email chain of CBA executives stating that the breach needed to be taken "extremely seriously", and that its chief risk officer should be in contact with AUSTRAC to inform the agency of its breaches.

"This is absolutely at odds with the case CBA tries to put, which is that it's not material," Stoljar said.

The case continues. It is scheduled to last six weeks in Federal court.

Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. 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 Scott Phillips.

More on Bank Shares

A businessman slips and spills his coffee.
Bank Shares

Why is the CBA share price taking a tumble on Wednesday?

CBA shares are taking a fall today. Let’s find out why.

Read more »

A woman puts up her hands and looks confused while sitting at her computer.
Bank Shares

Why are ANZ shares tumbling 4% on Wednesday?

What’s going on with the big four bank’s shares today? Let’s find out why they are falling.

Read more »

A woman wearing yellow smiles and drinks coffee while on laptop.
Earnings Results

CBA shares on watch after delivering $2.5b quarterly profit

The banking giant has made a big quarterly profit. But will it be enough for the market?

Read more »

A man sits in deep thought with a pen held to his lips as he ponders his computer screen with a laptop open next to him on his desk in a home office environment.
Bank Shares

3 reasons to sell NAB shares in November

Don’t bank on NAB shares rising from here, according to two experts.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Bank Shares

Why are NAB shares tumbling from their 17-year high?

The big four bank's shares have run out of steam. But why?

Read more »

Bank building with the word bank in gold.
Bank Shares

How long can ASX 200 bank shares keep smashing out new highs?

The ASX 200 Banks Index closed at a new all-time high yesterday.

Read more »

A woman's hair is blown back and her face is in shock at this big news.
Bank Shares

$150 a pop: Would I still buy CBA shares as they hit all-time highs?

Here's my take on CBA shares at $150...

Read more »

Friends at an ATM looking sad.
Bank Shares

Are ANZ shares a buy following the bank's latest results?

This broker has changed its mind following ANZ's earnings...

Read more »