The Australian government's financial intelligence agency AUSTRAC last year had accused the bank of serious systemic breaches of the laws, news.com.au reported.
The Commonwealth Bank will also pay 2.5 million Australian dollars in legal costs to AUSTRAC, subject to approval from the Federal Court. If the court approves the payment, then it will be the largest ever civil fine in the country's corporate history.
"While not deliberate, we fully appreciate the seriousness of the mistakes we made. Our agreement today is a clear acknowledgment of our failures and is an important step towards moving the bank forward. On behalf of Commonwealth Bank, I apologise to the community for letting them down," Comyn said in a statement.
In August last year, AUSTRAC had launched proceedings, claiming that the Commonwealth Bank failed to monitor lakhs of transactions done through its smart ATM network, which led to the breaching of anti-money laundering and counter-terrorism-financing laws, according to the report.
The agency had sought help from the police forces such as Australian Federal Police, New South Wales Police and Western Australia Police to help in their investigations.
In 2012, the intelligent deposit machines were launched without appropriate coding which would send the legally required reports for cash transactions above 10,000 Australian dollars to the regulator.
In 2015, AUSTRAC had asked the Commonwealth Bank to show the several missing transaction reports, which the latter discovered later that it did not send the reports to the financial intelligence agency, the report said.
AUSTRAC CEO Nicole Rose said that non-compliance with the existing laws will not be tolerated and sent a strong message in safeguarding the financial system of Australia from criminal misuse.
"As we have seen in this case, criminals will exploit poor business practices to launder the proceeds of their crimes. 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," Rose said in a statement.
"We know that businesses are the first line of defence in protecting the community and our financial system from criminal abuse, and it is critical for AML/CTF compliance and risk management to be embedded in business strategy and practices. I hope this result alerts the financial sector to the consequences of poor compliance and reinforces that businesses need to take their obligations seriously," she added.
Both AUSTRAC and the Commonwealth Bank will now approach the Federal Court with the agreement.
The hearing for the same is scheduled to be held in the next few months.