CBA chief Ian Narev’s retirement announced amid allegations bank breached money-laundering laws

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People walk out of a Commonwealth Bank of Australia branch in Sydney, Australia, August 12, 2015.
People walk out of a Commonwealth Bank of Australia branch in Sydney, Australia, August 12, 2015. Reuters/David Gray

Ian Narev, the chief executive of Commonwealth Bank, will step down from his post by the end of the 2018 financial year. He reportedly took a 55 percent pay cut in what appeared to be his final full year at the helm of Australia’s largest bank.

CBA’s annual report was released on Monday, showing that Narev got a total remuneration of $5.5 million in the 12 months to June 30. It was comparatively a smaller amount than the $12.3 million he received a year earlier.

The news of his retirement comes amid allegations the bank breached money-laundering and terrorism-financing laws. In a letter to shareholders, remuneration committee chairman David Higgins said the group delivered strong results for shareholders in FY17, but the board recognises the significant damage caused by recent allegations to the group’s reputation.

Narev has led Commonwealth Bank to a series of record annual profits. In the past two weeks, however, the bank has been under pressure after AUSTRAC alleged Commonwealth Bank of breaching money laundering and terrorism financing laws.

The CBA announced an eighth straight record annual profit of $9.9 billion last week. The AUSTRAC allegations outshine the bank’s accomplishment.

Narev’s retirement was confirmed by Chairman Catherine Livingstone on Monday. “The board recognises heightened public interest in executive remuneration, particularly having regard to the civil penalty proceedings initiated last week by the Australian Transaction Reports and Analysis Centre (AUSTRAC),” she said in a previous statement.

The bank maintained its board still had full confidence in Narev. However, the short-term incentives for the CEO and his group executives will be zero.

According to news.com.au, Narev received $1.43 million in short-term cash bonuses in the previous financial year. The bank reportedly handed out $8 million in total to the CEO and 11 executives. “In discussions with Ian, we have agreed it is important for the business that we deal with the speculation and questions about his tenure,” Livingstone added in a statement to the ASX.

Meanwhile, corporate watchdog Australian Securities and Investments Commission (ASIC) is conducting an investigation into the CBA’s response to the allegations for any breach of the Corporations Act. Last week, ASIC chairman Greg Medcraft said the lender must have alerted ASIC in 2015 when it first learnt of an issue in its cash deposit machines that has resulted to a case being filed by Australia’s financial intelligence agency in the Federal Court.

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