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AUSTRAC's malevolent response to Commonwealth Bank of Australia's admissions

It seemed like it was all over bar the shouting, or to be more precise, the haggling. Commonwealth Bank of Australia, CBA, admitted to the vast majority of the almost 54,000 failings listed in the civil penalty proceedings and in doing so entered what amounts to a plea in mitigation. AUSTRAC's response? To immediately file a further 100 allegations. That's just hostile litigation tactics and bordering on the malevolent, writes Nigel Morris-Cotterill, a former litigator.

I was a balls-out, steel-toe-capped kind of litigator. Right from the outset, my tactics were to (figuratively) kick my opponent and his client in the face until they surrendered. The plan was simple: if the case actually got to trial, I'd already lost because the costs of trial are high. A good litigator knows when his client is going to lose and looks to extricate him at the least possible cost, including legal expenses.

Of course, one also knows that, to be brutal, if one can weaken one's opponent's financial position, to make the cost of continuing with the litigation, uneconomic, that is also a hard but legitimate tactic. That's why some lawyers (I was never one of them) adopt what is called death by paper - overwhelming the other side with a mass of documentation.

AUSTRAC knew they were investigating other cases that had come to light after the initial investigation. They knew they had enough evidence to file additional allegations. They knew that CBA was having to devote enormous resources to investigating the circumstances of the near 54,000 allegations. AUSTRAC knew that the costs would be huge but that there would be some economies of scale in CBA being able to investigate the cases en masse. And AUSTRAC waited.

AUSTRAC could have given CBA advance warning of the investigations so that CBA could itself investigate those cases while it was looking into the existing allegations. But AUSTRAC chose not to.

AUSTRAC could have told CBA that other charges were coming and that time for filing a defence would be extended until x days after the new batch of charges. But AUSTRAC chose not to.

Instead, AUSTRAC waited until CBA filed its defence and then immediately hit it again, sending its researchers back down the rabbit holes they had just vacated, to look at data that in many cases will have already been looked at.

There is a general rule that one does not antagonise a regulator and AUSTRAC has regulatory functions in addition to its prosecution role and that of FIU. But this time, CBA would be justified in standing up to AUSTRAC and applying to the Court for orders to prevent AUSTRAC adopting hostile tactics that, ultimately, are a cost to the shareholders in the bank who, it is clear, are already going to suffer a substantial fine.

CBA can ask the court to order that it has an extended period to respond to the new allegations and that AUSTRAC immediately disclose any further allegations it intends to bring, that those allegations must be brought within a set period and the time for defence set with regard to that period. And there should be an Order that AUSTRAC be barred from presenting further allegations after that period.

Let's be clear: the new allegations are startling. They relate to very, very serious circumstances. It is absolutely right that they should be brought. Where AUSTRAC have behaved, to my mind, in a manner that is close to unacceptable, is in the timing of the filing of those allegations.

This is not a commercial dispute where two public companies are slugging it out. So far as the money is concerned, it's the people (taxpayers) v the people (shareholders). AUSTRAC should bear in that in mind and should not act in ways that have, intentionally or as a by-product, the effect of driving up costs on one or both sides. The Federal Court, on the application of CBA or on its own initiative, should make sure AUSTRAC doesn't do that.

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Nigel Morris-Cotterill is Head, the Anti Money Laundering Network, ultimate owner of World Money Laundering Report. He is the author of "Sun Tzu and the Art of Litigation," The Essential Guide to winning in litigation. Click here for details

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