The National Australia Bank Ltd (ASX: NAB) share price has taken a bit of a hit in the last week. Can the NAB share price remain resilient in light of compliance issues?
NAB share price
What’s keeping NAB awake at night?
As reported by my colleague, Jaz Harrison, the Australian Transaction Reports and Analysis Centre (AUSTRAC) reported potential issues regarding NAB’s compliance with anti-money laundering and counter-terrorism financing (AML and CTF) rules.
This stems from the findings made in the Hayne Royal Commission.
These findings include the failure to report transactions over $10,000, international funds transfers and the failure to conduct proper and timely due diligence on correspondent banks.
Such shortcomings were also uncovered at the Commonwealth Bank of Australia (ASX: CBA) and Westpac (ASX: WBC). This resulted in hefty fines.
But AUSTRAC’s recent surveillance is more concerned about NAB’s know-your-customer (KYC) obligations.
KYC issues still remain
KYC obligations refer to a bank’s ability to understand who its customers are, where their money comes from and where it goes.
As covered in the Australian Financial Review, the Royal Commission found 148,154 customers were not “properly screened and AML-CTF risk-rated”. This was in 2016.
In 2017, another 70,000 customers fell in the same basket.
On top of this, NAB did not have an automated process to adjust a customer’s risk rating if their country of residence risk factor was rerated.
What now for NAB?
These are some examples that illustrate what AUSTRAC is concerned about.
Some of these concerns span across a 10 to 15 year period, so you can imagine how many more breaches were not highlighted here.
In saying this, NAB has deployed a significant amount of capital to rectify these issues, in particular the appointment of former AUSTRAC CEO, Paul Jevtovic.
Despite AUSTRAC indicated it will not look to issue a civil penalty, I would carefully monitor NAB’s progress.
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