Claims around violations of money laundering controls have hit the bank and now it announces that its CEO since late 2011 is to step down to make way for a replacement.

Commonwealth Bank of Australia, embroiled in a money laundering scandal, has confirmed that its chief executive, Ian Narev, is retiring by the end of the 2018 financial year although exact timing depends on when the lender can find a replacement.

Succession planning is an ongoing process at all levels of the bank.  In discussions with Ian we have also agreed it is important for the business that we deal with the speculation and questions about his tenure. Today’s statement provides that clarity and will ensure he can continue to focus, as CEO, on successfully managing the business,” Catherine Livingstone, chairman of CBA, said in a statement yesterday.

The announcement comes as Australia’s financial intelligence and regulatory agency, AUSTRAC, has kicked off civil penalty proceedings against CBA for "serious and systemic non-compliance" with rules to stop money laundering and terrorism finance. AUSTRAC alleges that the bank failed to report suspicious matters either on time or at all involving transactions totalling over A$77 million ($61.2 million). In a response issued 4 August, the bank said: "We have been in discussions with AUSTRAC for an extended period and have cooperated fully with their requests.”

Narev’s departure as CEO will bring to an end a tenure in the post that started in December 2011. Narev joined CBA in 2007 as group head of strategy. From 2009 until his appointment as CEO, he was group executive, business and private banking, with responsibility for SME banking, private banking and the CommSec retail brokerage business. Prior to joining CBA, Ian was a partner of McKinsey & Company. He worked in McKinsey's New York, Sydney and Auckland offices from 1998 to 2007.

Some of the money involved in the subject of the claim against CBA was allegedly transferred to bank accounts in Hong Kong, adding that three arrests had already been made in the city, regarding the case (source: South China Morning Post). Media reports (Australian Financial Review) have said that the Hong Kong Monetary Authority have launched a probe into CBA. 

Separately, last week Australia and New Zealand Banking Group stated that contrary to a report, it wasn’t aware of any claims against it for similar matters relating to AML breaches (see that story here). 

A few days ago CBA produced happier news by reporting net profit after tax, on a statutory basis, of A$9.928 billion ($7.84 billion) for the financial year period ending 30 June, a gain of 7.6 per cent. On a cash basis, net profit after tax rose 4.6 per cent year-on-year to A$9.881 billion. Media reports said the result was slightly ahead of analysts’ expectations.