Australia's CBA was aware of failures well before money laundering suit

SYDNEY (Reuters) - Commonwealth Bank of Australia confirmed on Friday that its own internal reporting had flagged shortcomings in its monitoring of offshore transactions as early as February, well before it publicly disclosed alleged illicit transfers.

The confidential review showed there was no transaction monitoring for CBA's businesses including debt capital markets, leasing, institutional lending in Australia and for some of its international locations such as Singapore, Hong Kong, Shanghai, Tokyo, London and New York, Sky News Business reported earlier.

Australia's biggest bank said in a statement to the Australian Securities Exchange later on Friday that the report referred to "working document, proposing technology enhancements as part of our ongoing programme of action".

Australia's financial crime fighting agency, AUSTRAC, filed a civil lawsuit against the A$130 billion lender last month accusing it of failing to stop some 54,000 breaches of anti-money laundering rules.

Corporate regulator the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority have since started investigating the bank over AUSTRAC's allegations.

In particular, ASIC has said it is looking at whether CBA adequately disclosed what it knew about the suspicious transactions.

A top class action law firm has also threatened to sue CBA for allegedly failing to disclose that it was facing money-laundering charges, accusing it of "abject failure of corporate governance and risk management".

CBA has said it will defend itself in the AUSTRAC lawsuit, blaming a software error for most of the alleged breaches.

The allegations have shaken investors, with CBA shares falling sharply since AUSTRAC filed its lawsuit last month. The stock was down 0.3 percent in early trading on Friday, while the broader market was flat.

"Our take is that this is way more than just a coding error ... and today's development is further evidence of that," CLSA banking analyst Brian Johnson told Reuters.

(Reporting by Paulina Duran in Sydney and Anusha Ravindranath in Bengaluru; Editing by Byron Kaye and Stephen Coates)