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CBA cops record $700m hit in AUSTRAC case

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Commonwealth Bank will pay the largest fine in Australian corporate history after agreeing to pay $700 million to settle the money-laundering and terrorism-funding case brought by AUSTRAC.

CBA has admitted to 53,700 breaches of anti-money laundering and counter-terrorism funding laws, bringing to an end a scandal that led to Ian Narev's departure as chief executive.

The civil penalty dwarfs the $43 million Tabcorp paid last year over breaches of the same law and far exceeds the $375 million CBA had set aside to cover the issue when it announced its first-half results in February.

However, it fell short of the most dramatic analyst predictions of more than $1 billion and was greeted positively by investors.

CBA shares rose as much as 2.4 in early trade on Monday and were still 1.5 per cent higher at at $69.72 at 1444 AEST.

AUSTRAC chief executive Nicole Rose said the penalty sent a strong message to banks - already under pressure following scandals that led to the current royal commission - that serious breaches would not be tolerated.

"As we have seen in this case, criminals will exploit poor business practices to launder the proceeds of their crimes," Ms Rose said in a statement.

"This has real impacts on the everyday lives of Australians and puts the community at risk by increasing opportunities for terrorists to support attacks here and overseas, and enabling organised crime groups to peddle drugs to our families and friends."

CBA chief executive Matt Comyn said the lender had not deliberately breached the law by failing to provide the regulator with timely notification of potentially suspicious transactions.

However he admitted that the bank's risk procedures and due diligence were not up to scratch.

"While not deliberate, we fully appreciate the seriousness of the mistakes we made," Mr Comyn said in a statement.

"Our agreement today is a clear acknowledgement of our failures and is an important step towards moving the bank forward."

CBA will record a $700 million provision in its results for the year to June 30, which will be announced on August 8.

The money will go into consolidated revenue and be used to pay federal government expenses such as the banking royal commission, Treasurer Scott Morrison said on Monday.

"There is no shortage of bills that have to be paid," Mr Morrison told reporters.

Mr Comyn, who was promoted to replace Mr Narev in April, said CBA had spent more than $400 million on anti-money laundering compliance measures.

Ms Rose said banks had to recognise their role in law enforcement.

"We know that businesses are the first line of defence in protecting the community and our financial system from criminal abuse,," Ms Rose said.

"I hope this result alerts the financial sector to the consequences of poor compliance, and reinforces that businesses need to take their obligations seriously."

The agreement, which also includes CBA paying $2.5 million in legal fees, is subject to Federal Court approval.

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