Commonwealth Bank executives hit where it hurts

The Austrac action alleges more than 53,700 contraventions of the anti-money laundering act

Commonwealth Bank executives hit where it hurts

Australia's Commonwealth Bank said Tuesday it would slash pay and bonuses of top executives, but backed its chief executive over alleged breaches of money laundering and terrorism financing laws.

"In reaching this conclusion the overriding consideration of the board was the collective accountability of senior management for the overall reputation of the group", Chairman Catherine Livingstone said in a statement.

Shares of the other "Big Four" banks pared their of some losses.

Commonwealth chair Catherine Livingstone said amid "heightened public interest" in top executives' pay, the board had made a decision to cut short-term bonuses for chief executive Ian Narev and others for the 2017 financial year.

An inquiry known as a Royal Commission could have the ability to interrogate bank executives and demand full disclosure of internal documents.

The board did not absolve itself from any responsibility for the scandal, cutting its own non-executive director fees by 20 per cent for the current financial year.

CBA chief executive Ian Narev's total short term incentive for 2015-2016 was $2.862 million.

Full details of this years' remuneration outcomes will be disclosed in the board's annual report, due to be released next week.

The bank's board received a first "strike" from shareholders angry about executive pay levels at its 2016 AGM and is now at risk of a second strike - and subsequent board spill vote - at this year's meeting.

The bank is accused of systematically failing to identify, monitor and report suspicious transactions totalling over A$77 million, and failing to act promptly on police instructions to suspend suspicious accounts.

After the allegations, "there is just a degree of nervousness at the moment that CBA might not be the only institution that's going to come under the spotlight from AUSTRAC", said James McGlew, executive director of corporate stock broking for Argonaut in Perth.

Morningstar analyst David Ellis said CBA would be able to meet any financial penalty if found guilty of the AUSTRAC charges but risks to its reputation are more serious.

Others involved money-laundering syndicates subject to police investigations.

Each breach could attract Aus$18 million (US$14 million) in fines, potentially running into the billions of dollars.

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