SYDNEY (Reuters) - A law firm threatened on Wednesday to file a class action suit against Commonwealth Bank of Australia (CBA.AX) for allegedly failing to disclose that it was facing money-laundering charges, in the latest headache for Australia’s biggest listed company.
Without revealing its potential claim, top class action law firm Maurice Blackburn Lawyers and litigation funder IMF Bentham (IMF.AX) said their proposed lawsuit would be the largest of its kind ever seen in Australia.
The claim could amount to billions of dollars based on the A$7.9 billion ($6.23 billion) wiped from CBA’s market value in immediate response to the money-laundering charges, filed by a government watchdog on Aug. 3, IFM said. That would easily surpass the A$200 million ($157.82 million) shopping center owner Centro settled for in 2012.
On top of the billions of dollars in fines that CBA is already facing for the alleged breaches of money-laundering and terror-financing laws, the lawsuit is another risk shareholders could do without.
“If history is any guide the bank will settle to avoid any embarrassments of discovery,” Australian Shareholders’ Association director Stephen Mayne told Reuters, referring to the “formidable” legal team behind the potential claim.
CBA shares were down 0.5 percent in early afternoon trade, slightly weaker than rival banks and the broader market, which was flat.
Andrew Watson, national head of class actions at Maurice Blackburn, said it was “astounding” that CBA had not advised the market of the allegedly illicit transactions that occurred on its systems until the day after financial intelligence agency AUSTRAC filed its civil case against the bank.
“The AUSTRAC allegations, if proven, show an abject failure of corporate governance and risk management. The failure to make proper disclosure to the market regarding those failures adds insult to injury for shareholders,” he said in a statement.
The CBA board was aware of the breaches in the second half of 2015, he said.
CBA said in a statement that it had not been served with any legal proceedings.
The bank has said it will defend itself against the AUSTRAC claims and has blamed a coding-error for most of the more than 53,000 suspect transactions it is alleged to have processed.
The suit could go ahead as soon as seven or more people sign up. Maurice Blackburn has extracted over A$1 billion in class action settlements from Australian public companies, including National Australia Bank (NAB.AX).
If launched, the class action would involve shareholders who bought and held shares in the period from Aug. 17 2015, until 1:00 pm on Aug. 3, 2017, IFM executive director Hugh McLernon said.
Reporting by Paulina Duran and Jonathan Barrett in SYDNEY.; Editing by Stephen Coates